Steve Baldwin and Pacific Justice Institute V. Kathleen Sebelius

Home , Commerce Clause, Origination Clause, Rational basis review

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1 TONY WEST 2 Assistant Attorney General IAN HEATH GERSHENGORN 3 Deputy Assistant Attorney General LAURA E. DUFFY 4 United States Attorney 5 JENNIFER R. RIVERA Director 6 SHEILA M. LIEBER Deputy Director 7 ETHAN DAVIS 8 JOEL McELVAIN JUSTIN M. SANDBERG 9 Attorneys U.S. Department of Justice 10 Civil Division, Federal Programs Branch 11 20 Massachusetts Ave., NW, Room 7332 Washington, DC 20001 12 Telephone: (202) 514-2988

13 Fax: (202) 616-8202 Email: [email protected] 14 Attorneys for the Defendants 15

16 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA 17 STEVE BALDWIN and PACIFIC ) 18 JUSTICE INSTITUTE, ) Case No. 3:10-cv-01033-DMS-WMC 19 ) Plaintiffs, ) Memorandum of Points and Authorities in 20 ) Opposition to Plaintiffs’ Motion for v. ) Preliminary Injunction and in Support of 21 ) Defendants’ Motion to Dismiss 22 KATHLEEN SEBELIUS, in her official ) capacity as Secretary of the United States ) Date: July 16, 2010 23 Department of Health and Human Services, ) Time: 1:30 p.m. et al., ) Courtroom: 10 24 ) The Honorable Dana M. Sabraw 25 Defendants. )

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1 Table of Contents 2 INTRODUCTION ...... 1 3 BACKGROUND ...... 5 4 A. Statutory Background...... 5 5 B. Current Proceedings...... 8 6 C. Applicable Standards ...... 8 7 ARGUMENT...... 9 8

9 I. Plaintiffs’ Challenges to the Employer Responsibility Provision and the Minimum Coverage Provision Fail...... 9 10 A. The Court Lacks Jurisdiction Over These Claims...... 10 11 1. Plaintiffs Lack Standing Because Neither the Employer 12 Responsibility Provision nor the Minimum Coverage Provision 13 Takes Effect Until 2014...... 10

14 2. Plaintiffs’ Claims Are Unripe...... 13

15 3. The Anti-Injunction Act Bars Plaintiffs’ Claims...... 13 16 B. The Comprehensive Regulatory Measures of the ACA Fall Within 17 Congress’s Article I Powers...... 14

18 1. Congress’s Authority to Regulate Interstate Commerce Is Broad ...... 14 19 2. The ACA Regulates the Interstate Markets in Health Insurance 20 and Health Care Services...... 17

21 3. The Employer Responsibility and Minimum Coverage Provisions 22 Regulate Activity That Substantially Affects Interstate Commerce ...... 19

23 4. The Provisions Are Integral Parts of the Larger Regulatory Scheme 24 and Are Necessary and Proper to Congress’s Regulation of Interstate Commerce ...... 22 25 5. The Provisions Are Valid Exercises of Congress’s Independent 26 Power under the General Welfare Clause...... 26 27 II. Mr. Baldwin’s Direct Tax and Origination Clause Claims Should Be Dismissed...... 29 28 A. Mr. Baldwin Cannot Prevail on His Direct Tax Claim...... 30 i Case 3:10-cv-01033-DMS -WMC Document 24 Filed 06/25/10 Page 3 of 63

2 B. Mr. Baldwin Cannot Prevail on His Origination Clause Claim...... 33

3 III. The Claims under the Due Process Clause, Federal Rule of Evidence 501, and California Rule of Evidence 992 Are Meritless...... 37 4

5 IV. Mr. Baldwin Cannot Prevail on His Claim that the ACA Violates Equal Protection...... 40

6 V. The Executive Order Is Not a Line Item Veto...... 43

7 VI. Plaintiffs’ Claims Regarding Section 1552 Are Baseless...... 45 8 VII. Plaintiffs Are Not Entitled to a Preliminary Injunction...... 46 9

10 A. Plaintiffs Make No Showing That They Would Be Irreparably Harmed in the Absence of Emergency Relief...... 46 11 B. The Balance of the Equities and the Public Interest Weigh Strongly 12 Against Granting Preliminary Relief...... 47 13

14 CONCLUSION ...... 48

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1 TABLE OF AUTHORITIES 2

3 Cases: 4

5 Abbott Labs. v. Gardner, 6 387 U.S. 136 (1967) ...... 13

7 Allen v. Wright, 468 U.S. 737 (1984) ...... 42 8

9 Alsea Valley Alliance v. Dept. of Commerce, 358 F.3d 1181 (9th Cir. 2004) ...... 47 10 American Trucking Assns., Inc. v. City of Los Angeles, 11 559 F.3d 1046 (9th Cir. 2009) ...... 4, 9, 47 12 Armstrong v. United States, 13 759 F.2d 1378 (9th Cir. 1985) ...... 35

14 Ashcroft v. Iqbal, 15 129 S. Ct. 1937 (2009) ...... 9

16 Barr v. United States,

17 736 F.2d 1134 (7th Cir. 1984) ...... 14

18 Bartley v. United States, 123 F.3d 466 (7th Cir. 1997) ...... 14 19

20 Bennett v. Spear, 520 U.S. 154 (1997) ...... 46 21 Boating Indus. Assns. v. Marshall, 22 601 F.2d 1376 (9th Cir. 1979) ...... 42 23 Bob Jones Univ. v. Simon, 24 416 U.S. 725 (1974) ...... 14, 28

25 Boday v. United States, 26 759 F.2d 1472 (9th Cir. 1985) ...... 35

27 Bolling v. Sharpe, 347 U.S. 497 (1954) ...... 41 28

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1 Buckley v. Valeo, 2 424 U.S. 1 (1976) ...... 29

3 Caribbean Marine Servs. Co. v. Baldrige, 844 F.2d 668 (9th Cir. 1998) ...... 47 4

5 Carroll v. Nakatani, 342 F.3d 934 (9th Cir. 2003) ...... 45 6 Charles C. Steward Mach. Co. v. Davis, 7 301 U.S. 548 (1937) ...... 26 8 Citizens United v. FEC, 9 130 S. Ct. 876 (2010) ...... 11

10 Clinton v. New York, 11 524 U.S. 417 (1998) ...... 45

12 Daniel v. Paul,

13 395 U.S. 298 (1969) ...... 22

14 Doe v. United States, 419 F.3d 1058 (9th Cir. 2005) ...... 44 15

16 Eisner v. Macomber, 252 U.S. 189 (1920) ...... 32, 33 17 FDA v. Brown & Williamson Tobacco Corp., 18 529 U.S. 120 (2000) ...... 29 19 Flint v. Stone Tracy Co., 20 220 U.S. 107 (1911) ...... 34

21 Get Outdoors II, LLC v. City of San Diego, 22 506 F.3d 886 (9th Cir. 2007) ...... 12

23 Golden Gate Rest. Ass'n v. City & County of San Francisco, 512 F.3d 1112 (9th Cir. 2008) ...... 48 24

25 Gonzales v. Raich, 545 U.S. 1 (2005) ...... passim 26 Grand Lodge of Fraternal Order of Police v. Ashcroft, 27 185 F. Supp. 2d 9 (D.D.C. 2001) ...... 13 28

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1 Harris v. IRS, 2 758 F.2d 456 (9th Cir. 1985) ...... 35

3 Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964) ...... 22 4

5 Helvering v. Davis, 301 U.S. 619 (1937) ...... 27 6 Hodel v. Va. Surface Mining & Reclamation Ass'n, 7 452 U.S. 264 (1981) ...... 26 8 Hollander v. Inst. for Research on Women & Gender at Columbia Univ., 9 2009 WL 1025960 (S.D.N.Y. 2009) ...... 41

10 Hosp. Bldg. Co. v. Trustees of Rex Hosp., 11 425 U.S. 738 (1976) ...... 18

12 Hylton v. United States,

13 3 U.S. (3 Dall.) 171 (1796) ...... 31, 32, 33

14 In re Madison Guar. Savings and Loan Ass'n, 173 F.3d 866 (D.C. Cir. 1999) ...... 40 15

16 In re Navy Chaplaincy, 534 F.3d 756 (D.C. Cir. 2008) ...... 47 17 Joint Stock Society v. UDV North America, Inc., 18 266 F.3d 164 (3d Cir. 2001)...... 42 19 Jones v. United States, 20 529 U.S. 848 (2000) ...... 16

21 Knowlton v. Moore, 22 178 U.S. 41 (1900) ...... 32

23 Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001) ...... 16 24

25 License Tax Cases, 72 U.S. (5 Wall.) 462 (1867) ...... 2, 26 26 Lincoln Fed. Labor Union v. Nw. Iron & Metal Co., 27 335 U.S. 525 (1949) ...... 38 28

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1 Lochner v. New York, 2 198 U.S. 45 (1905) ...... 2, 4, 38

3 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) ...... 10-13, 46 4

5 M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819) ...... 25 6 McConnell v. FEC, 7 540 U.S. 93 (2003) ...... 11 8 Millard v. Roberts, 9 202 U.S. 429 (1906) ...... 36, 37

10 Moon v. Freeman, 11 379 F.2d 382 (9th Cir. 1967) ...... 30

12 Murphy v. IRS,

13 493 F.3d 170 (D.C. Cir. 2007) ...... 33

14 NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937) ...... 19 15

16 Nebbia v. New York, 291 U.S. 502 (1934) ...... 38 17 Neighbors of Cuddy Mountain v. Alexander, 18 303 F.3d 1059 (9th Cir. 2002) ...... 46 19 Nelson v. Sears, Roebuck & Co., 20 312 U.S. 359 (1941) ...... 28

21 Newdow v. Rio Linda Union Sch. Dist., 22 597 F.3d 1007 (9th Cir. 2010) ...... 42

23 Nunez v. United States, 546 F.3d 450 (7th Cir. 2008) ...... 46 24

25 Pac. Ins. Co. v. Soule, 74 U.S. (7 Wall.) 433 (1868) ...... 33 26 Plyler v. Doe, 27 457 U.S. 217 (1982) ...... 43 28

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1 Pollock v. Farmers' Land & Trust Co., 2 158 U.S. 601 (1895) ...... 32

3 Rainey v. United States, 232 U.S. 310 (1914) ...... 35 4

5 Sabri v. United States, 541 U.S. 600 (2004) ...... 26 6 Scott v. Pasadena Unified Sch. Dist., 7 306 F.3d 646 (9th Cir. 2002) ...... 11 8 Simmons v. United States, 9 308 F.2d 160 (4th Cir. 1962) ...... 28

10 Smelt v. County of Orange, 11 447 F.3d 673 (9th Cir. 2006) ...... 11, 44

12 Sonzinsky v. United States,

13 300 U.S. 506 (1937) ...... 28

14 South Carolina v. Block, 717 F.2d 874 (4th Cir. 1983) ...... 30 15

16 South Dakota v. Dole, 483 U.S. 203 (1987) ...... 27 17 Spenceley v. MD Anderson Cancer Center., 18 938 F. Supp. 398 (S.D. Tex. 1996) ...... 42 19 Springer v. United States, 20 102 U.S. 586 (1881) ...... 32

21 Steel Co. v Citizens for a Better Environment, 22 523 U.S. 83 (1998) ...... 9

23 Summers v. Earth Island Institute, 129 S. Ct. 1142 (2009) ...... 1 24

25 Texas Office of Pub. Utility Counsel v. F.C.C., 183 F.3d 393 (5th Cir. 1999) ...... 35 26 Texas v. United States, 27 523 U.S. 296 (1998) ...... 13, 45 28

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1 Thomas v. Mundell, 2 572 F.3d 756 (9th Cir. 2009) ...... 42, 44, 46

3 Thomas v. Union Carbide Agr. Products Co., 473 U.S. 568 (1985) ...... 13 4

5 Twin City Bank v. Nebeker, 167 U.S. 196 (1897) ...... 35, 36, 37 6 Tyler v. United States, 7 281 U.S. 497 (1930) ...... 3, 31 8 U.S. Philips Corp. v. KVC Bank N.V., 9 590 F.3d 1091 (9th Cir. 2010) ...... 9

10 Union Elec. Co. v. United States, 11 363 F.3d 1292 (Fed. Cir. 2004)...... 32, 33

12 United States v. Clintwood Elkhorn Mining Co.,

13 553 U.S. 1 (2008) ...... 14

14 United States v. Comstock, 130 S. Ct. 1949 (2010) ...... 25, 26 15

16 United States v. Darby, 312 U.S. 100 (1941) ...... 18 17 United States v. Kahriger, 18 345 U.S.22 (1953) ...... 28 19 United States v. Lopez, 20 514 U.S. 549 (1995) ...... 16, 17

21 United States v. Mfrs. Nat'l Bank of Detroit, 22 363 U.S. 194 (1960) ...... 3, 31

23 United States v. Morrison, 529 U.S. 598 (2000) ...... 17 24

25 United States v. Munoz-Flores, 495 U.S. 385 (1990) ...... 35, 36 26 United States v. Oakland Cannabis Buyers' Coop., 27 532 U.S. 483 (2001) ...... 48 28

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1 United States v. Sanchez, 2 340 U.S. 42 (1950) ...... 26, 28

3 United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533 (1944) ...... 18, 24 4

5 United States v. Stewart, 451 F.3d 1071 (9th Cir. 2006) ...... 16 6 United States v. Virginia, 7 518 U.S. 515 (1996) ...... 43 8 United States v. Wrightwood Dairy Co., 9 315 U.S. 110 (1942) ...... 26

10 Usery v. Turner Elkhorn Mining Co., 11 428 U.S. 1 (1976) ...... 39

12 Valley Forge Christian Coll. v. Americans United,

13 454 U.S. 464 (1982) ...... 1, 42, 45

14 Veazie Bank v. Fenno, 75 U.S. (8 Wall.) 533 (1869) ...... 32, 33 15

16 Vukasovich, Inc. v. Commissioner, 790 F.2d 1409 (9th Cir. 1986) ...... 33 17 Washington v. Glucksberg, 18 521 U.S. 702 (1997) ...... 3, 38 19 Weinberger v. Romero-Barcelo, 20 456 U.S. 305 (1982) ...... 48

21 West Coast Hotel Co. v. Parrish, 22 300 U.S. 379 (1937) ...... 38

23 Wickard v. Filburn, 317 U.S. 111 (1942) ...... passim 24

25 Constitution and Statutes: 26 U.S. Const. art. I, § 2, cl. 3 ...... 15, 31 27 U.S. Const. art. I, § 7...... 3, 34 28 U.S. Const. art. I, § 8, cl. 1 ...... 26 ix Case 3:10-cv-01033-DMS -WMC Document 24 Filed 06/25/10 Page 11 of 63

1 U.S. Const. art. I, § 8, cl. 3...... 15 2 U.S. Const. art. I, § 8, cl. 18...... 2 3 U.S. Const. art. I, § 9, cl. 4...... 31 4 U.S. Const. art. VI, cl. 2...... 40 5 U.S. Const. amend. XVI ...... 31-33 6

7 5 U.S.C. § 704 ...... 46

8 5 U.S.C. § 706(2) ...... 47

9 26 U.S.C. § 4980B ...... 28 10 26 U.S.C. § 4980D...... 28 11 26 U.S.C. § 4980H(d) ...... 14 12

13 26 U.S.C. § 5000A(a) ...... 27, 34

14 26 U.S.C. § 5000A(b)(1)...... 27, 34

15 26 U.S.C. § 5000A(b)(2)...... 27 16 26 U.S.C. § 5000A(c)(1)(2) ...... 27, 33 17

18 26 U.S.C. § 5000A(d) ...... 22

19 26 U.S.C. § 5000A(e) ...... 22

20 26 U.S.C. § 5000A(e)(1)...... 33 21 26 U.S.C. § 5000A(e)(2)...... 27 22 26 U.S.C. § 5000A(g)(1)...... 14 23

24 26 U.S.C. § 5000A(g)(2)...... 27

25 26 U.S.C. § 6671(a) ...... 14

26 26 U.S.C. § 7421(a) ...... 13 27 26 U.S.C. § 9801...... 18 28

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1 26 U.S.C. § 9803...... 18 2

3 28 U.S.C. § 2201(a) ...... 14

4 29 U.S.C. § 1181(a) ...... 18

5 29 U.S.C. § 1182...... 18 6 42 U.S.C. § 300gg...... 18 7 42 U.S.C. § 300gg-1 ...... 18 8

9 42 U.S.C. § 1395dd...... 19

10 42 C.F.R. § 50.301...... 44

11 42 C.F.R. § 50.302...... 44 12 42 C.F.R. § 50.303...... 44 13

14 42 C.F.R. § 50.304...... 44

15 42 C.F.R. § 50.306...... 44

16 Pub L. No. 93-406, 88 Stat. 829 (1974)...... 18 17 Pub. L. No. 99-272, 100 Stat. 82 (1985)...... 18 18 Pub. L. No. 104-191, 110 Stat. 1936 (1996)...... 18 19

20 Pub. L. No. 104-191, 110 Stat. 1979 (1996)...... 18

21 Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010)

22 § 1001...... 7, 12 23 § 1002...... 27 § 1201...... 7, 23 24 § 1311...... 6 § 1331...... 6 25 § 3504...... 40 26 § 3509(a)-(g) ...... 41 § 1401-02 ...... 7 27 § 1421...... 6 § 1501...... 7, 30, 37, 48 28 § 1501(a) ...... 29, 47 xi Case 3:10-cv-01033-DMS -WMC Document 24 Filed 06/25/10 Page 13 of 63

1 § 1501(a)(2)(A)...... 6, 18, 19, 21, 24 2 § 1501(a)(2)(B) ...... 5 § 1501(a)(2)(E) ...... 5 3 § 1501(a)(2)(F)...... 2, 5, 7, 20, 22 § 1501(a)(2)(G)...... 5 4 § 1501(a)(2)(H)...... 7, 23, 24 5 § 1501(a)(2)(I) ...... 3, 7, 24 § 1501(a)(2)(J) ...... 25 6 § 1501(b)...... 26, 27, 36 § 1513...... 6, 12, 27, 37 7 § 1513(d)(2)(A)...... 11 8 § 1552...... 46, 47 § 2001...... 7 9 § 10106...... 7 § 10106(a) ...... passim 10 § 10503(a) ...... 44 11 § 10503(b)(1) ...... 44

12 Pub. L. No. 111-152, 124 Stat. 1029 (Mar. 30, 2010):

13 § 1002...... 7, 27 14 § 2303...... 7, 44

15 Legislative Materials: 16 47 Million and Counting: Why the Health Care Market Is Broken: Hearing Before the S. 17 Comm. on Finance, 110th Cong. (2008)...... 21

18 Congressional Budget Office, 2008 Key Issues in Analyzing Major Health Insurance 19 Proposals (Dec. 2008) ...... passim

20 Congressional Budget Office, The Long-Term Budget Outlook (June 2009)...... 5

21 155 Cong. Rec. E1819 (statement of Rep. Maloney) ...... 43 22 Council of Economic Advisers, The Economic Case for Health Care Reform 23 (June 2009)...... 19, 20

24 Council of Economic Advisers, The Economic Report of the President 25 (Feb. 2010)...... 20

26 The Economic Case for Health Reform: Hearing Before the H. Comm. on the Budget, 111th Cong. 5 (2009)...... 18 27 st 28 Health Reform in the 21 Century: H. Comm. on Ways and Means, 111th Cong. (2009) ...... 20, 24 xii Case 3:10-cv-01033-DMS -WMC Document 24 Filed 06/25/10 Page 14 of 63

2 H.R. Rep. No. 111-443 (2010) ...... 6, 20 3 H.R. 3962, 111th Cong. (2009) ...... 34 4 Letter from Douglas W. Elmendorf, Director, CBO to the Hon. Nancy Pelosi, Speaker, 5 U.S. House of Representatives (Mar. 20, 2010) ...... 8 6 Joint Comm. on Taxation, 111th Cong., Technical Explanation of the Revenue 7 Provisions of the “Reconciliation Act of 2010,” as amended, in Combination with the “Patient Protection and Affordable Care Act” (Mar. 21, 2010) ...... 28 8

9 S. Rep. No. 111-89 (2009) ...... 20

11 Miscellaneous:

12 Bruce Ackerman, Taxation and the Constitution, 99 Colum. L. Rev. 1, 8-13 (1999) ...... 31, 33 13 Erwin Chemerinsky, Constitutional Law 625 (3d ed. 2006) ...... 39 14

15 Executive Order No. 13,535, 75 Fed. Reg. 15,599 (2010) ...... 4, 43

16 Fed. R. Evid. 201 ...... 16

17 Vicki Lawrence MacDougall, Medical Gender Bias and Managed Care, 18 27 Okla. City U.L. Rev. 781, 800-818 (2002) ...... 43

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1 INTRODUCTION 2 Plaintiffs lack standing to invoke the jurisdiction of this Court over assorted claims that, 3 in any event, lack even a trace of legal substance. Plaintiffs have moved to enjoin 4

5 implementation of the Patient Protection and Affordable Care Act (“ACA” or “the Act”), even

6 though the key provisions that they challenge do not take effect until 2014. See Pub. L. No. 111

7 148, 124 Stat. 119 (Mar. 23, 2010), as amended by Health Care and Education Reconciliation 8 Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (Mar. 30, 2010). Plaintiffs’ predictions of 9 injury three and a half years from now are merely speculative. Nor can plaintiffs create standing 10

11 to challenge future government actions by disagreeing with them now. Additionally, with

12 respect to these key provisions and other parts of the law – such as those providing a statutory

13 footing for women’s health offices or requiring a statement on a website by Secretary Sebelius – 14 plaintiffs identify no particularized harm. Their asserted harm appears instead to be an alleged 15

16 erosion of the rule of law. Pls.’ Br. Supp. Mot. Prelim. Inj. 3. But the assertion of an abstract

17 interest in a law-abiding government does not satisfy the basic constitutional requirement of

18 injury-in-fact, Valley Forge Christian Coll. v. Americans United, 454 U.S. 464, 482 (1982), or 19 differentiate them from everyone else who happens to share this mere “generalized grievance[],” 20 id. at 475. As the Supreme Court stated in Summers v. Earth Island Institute, 129 S. Ct. 1142, 21

22 1148 (2009), the role of courts under Article III of the Constitution is “to redress or prevent

23 actual or imminently threatened injury to persons caused by private or official violation of law.

24 Except when necessary in the execution of that function, courts have no charter to review and 25 revise legislative and executive action.” Plaintiffs ask the Court to ignore those limitations here. 26 Plaintiffs’ quest to “revise legislative and executive action” also fails on the merits. 27

28 Among other legal errors, plaintiffs invoke long-discredited Lochner-era understandings of

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1 congressional power, misread the Supreme Court’s privacy cases, and confuse an executive order 2 for a line-item veto. Under modern jurisprudence, Congress acted well within its authority under 3 the Commerce Clause in adopting the employer responsibility provision – which will direct large 4

5 employers to provide insurance coverage for their employees or pay a penalty – and the

6 minimum coverage provision – which will require individuals, with exceptions, to maintain a

7 minimum level of health care insurance coverage or pay a penalty. Congress understood, and 8 plaintiffs do not deny, that virtually everyone at some point needs medical services, which cost 9 money. The ACA regulates economic decisions about how to pay for those services – whether 10

11 to pay in advance through insurance or to attempt to do so later out of pocket – decisions that, “in

12 the aggregate,” without question substantially affect the vast, interstate health care market.

13 Gonzales v. Raich, 545 U.S. 1, 22 (2005). 14 More than 45 million Americans have neither private health insurance nor the protection 15

16 of government programs such as Medicaid. Many of these individuals are uninsured because

17 they cannot afford coverage. Others are excluded by insurers’ restrictive underwriting criteria.

18 Still others make the economic decision to forego insurance altogether. Foregoing health 19 insurance, however, is not the same as foregoing health care. When accidents or illnesses 20 inevitably occur, the uninsured still receive medical assistance, even if they cannot pay. As 21

22 Congress documented, the cost of such uncompensated health care – $43 billion in 2008 alone –

23 are passed on to the other participants in the health care market: health care providers, insurers,

24 the insured population, governments, and taxpayers. Pub. L. No. 111-148, §§ 1501(a)(2)(F), 25 10106(a). Congress further determined that, without the minimum coverage provision, the 26 reforms in the Act, such as the ban on denying coverage and setting premiums based on pre 27

28 existing conditions, would not work, as they would amplify existing incentives for individuals to

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1 “wait to purchase health insurance until they needed care,” shifting even greater costs onto third 2 parties. Id. §§ 1501(a)(2)(I), 10106(a). Congress thus found that the minimum coverage 3 provision “is essential to creating effective health insurance markets in which improved health 4

5 insurance products that are guaranteed issue and do not exclude coverage of pre-existing

6 conditions can be sold.” Id. Congress’s authority under the Commerce Clause and the

7 Necessary and Proper Clause to adopt the minimum coverage provision is thus clear. 8 In addition, Congress has independent authority to enact this statute as an exercise of its 9 power under Article I, Section 8, to lay taxes and make expenditures to promote the general 10

11 welfare. License Tax Cases, 72 U.S. (5 Wall.) 462, 471 (1867). The employer responsibility

12 provision and the minimum coverage provision will raise substantial revenues, and both are

13 therefore valid under longstanding precedent, even though Congress also had a regulatory 14 purpose in enacting the provisions. It is equally well-established that a tax predicated on a 15

16 volitional event – such as a decision not to purchase health insurance – is not a “direct tax”

17 subject to apportionment under Article I, Sections 2 and 9. United States v. Mfrs. Nat’l Bank of

18 Detroit, 363 U.S. 194, 197-98 (1960); Tyler v. United States, 281 U.S. 497, 502 (1930). 19 Plaintiffs also assert that Congress violated the Origination Clause, U.S. Const. art. I, § 7, in 20 enacting these provisions, but ignore the fact that the ACA did originate as a House bill. 21

22 Plaintiffs’ other claims fare no better. They contend that they have a fundamental right

23 not to buy health insurance. But the supposed “right” to forego insurance, and to shift one’s

24 health care costs to third-parties, plainly is not “deeply rooted in this Nation’s history and 25 tradition,” nor is it a prerequisite to liberty. Washington v. Glucksberg, 521 U.S. 702, 721 26 (1997). Indeed, the Supreme Court long ago rejected the idea, embodied in Lochner v. New 27

28 York, 198 U.S. 45 (1905), and its progeny that commercial transactions are sacrosanct. Similarly

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1 meritless is the claim that Executive Order No. 13,535, 75 Fed. Reg. 15,599 (2010) – which 2 addresses restrictions on abortion funding in the ACA – acts as an unconstitutional line-item 3 veto. The order does not purport to negate any elements of the statute as a line item veto would. 4

5 Plaintiffs’ claims that the ACA violates equal protection by establishing women’s health offices,

6 and that the ACA must be enjoined due to a supposed failure by the Secretary of Health and

7 Human Services to comply with a publication requirement, are likewise spurious. 8 Because plaintiffs’ claims should be dismissed, a fortiori, they cannot show a likelihood 9 of success on the merits, as they are required to do to obtain a preliminary injunction. American 10

11 Trucking Assns. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009). Nor do plaintiffs

12 even attempt to show a second element for such relief, that they will likely suffer irreparable

13 harm absent the entry of a preliminary injunction. Instead, they rely on standards that the Ninth 14 Circuit has cast aside as too lenient. Id. The final two elements – the balance of the equities and 15

16 the public interest – also weigh heavily against a preliminary injunction. Id. The ACA is an

17 important national legislative reform designed to make health insurance coverage more available

18 and affordable. In enacting the ACA, Congress sought to counter the adverse economic effects 19 and avoid the personal tragedies caused by the current lack of insurance coverage for millions of 20 Americans. The statute was the product of an intense and thorough national debate, and years of 21

22 careful deliberation by Congress. Yet plaintiffs ask this Court to set aside the democratic

23 judgment of the elected branches of government and substitute their own policy preferences.

24 Notwithstanding the apparent strength of their convictions, plaintiffs are not entitled to second- 25 guess Congress’s legislative assessment of the public interest. The Court should grant 26 defendants’ motion to dismiss and deny plaintiffs’ motion for a preliminary injunction, as it 27

28 denied their application for a temporary restraining order.

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1 BACKGROUND 2 A. Statutory Background 3 In 2009, the United States spent more than 17% of its gross domestic product on health 4

5 care, in a $2.5 trillion market. Pub. L. No. 111-148, §§ 1501(a)(2)(B), 10106(a).

6 Notwithstanding these extraordinary expenditures, 45 million people – an estimated 15% of the

7 population – went without health insurance for some portion of 2009, and, absent the new 8 legislation, that number would have climbed to 54 million by 2019. Cong. Budget Office 9 (“CBO”), 2008 Key Issues in Analyzing Major Health Insurance Proposals 11 (Dec. 2008) 10

11 [hereinafter Key Issues]; see also CBO, The Long-Term Budget Outlook 21-22 (June 2009).

12 The record before Congress documents the staggering costs that a broken health care

13 system visits on individual Americans and the nation as a whole. The millions who lack health 14 insurance coverage still receive medical care, but often cannot pay for it. The costs of that 15

16 uncompensated care, $43 billion in 2008 alone, are shifted to providers, the insured population in

17 the form of higher premiums, to governments and to taxpayers. Pub. L. No. 111-148,

18 §§ 1501(a)(2)(F), 10106(a). But cost shifting is not the only harm imposed by the lack of 19 insurance. Congress found that the “economy loses up to $207,000,000,000 a year because of 20 the poorer health and shorter lifespan of the uninsured,” Pub. L. No. 111-148, §§ 1501(a)(2)(E), 21

22 10106(a), and concluded that 62 percent of all personal bankruptcies result in part from medical

23 expenses, id. §§ 1501(a)(2)(G), 10106(a). All these costs, Congress determined, substantially

24 affect interstate commerce. Id. §§ 1501(a)(2)(F), 10106(a). 25 In order to remedy this enormous problem for the American economy, the Act 26 comprehensively “regulates activity that is commercial and economic in nature: economic and 27

28 financial decisions about how and when health care is paid for, and when health insurance is

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1 purchased.” Pub. L. No. 111-148, §§ 1501(a)(2)(A), 10106(a). First, to address inflated fees and 2 premiums in the individual and small-business insurance market, Congress established health 3 insurance exchanges “as an organized and transparent marketplace for the purchase of health 4

5 insurance where individuals and employees (phased-in over time) can shop and compare health

6 insurance options.” H.R. Rep. No. 111-443, pt. II, at 976 (2010) (internal quotation omitted).

7 The exchanges will regulate premiums, implement procedures to certify qualified health plans, 8 coordinate participation and enrollment in health plans, and provide consumers with needed 9 information. Pub. L. No. 111-148, § 1311. 10

11 Second, the Act builds on the existing system of health insurance, in which most

12 individuals receive coverage as part of their employee compensation. See CBO, Key Issues, at

13 4-5. It creates a system of tax incentives for small businesses to encourage the purchase of 14 health insurance for their employees, and imposes penalties on certain large businesses that do 15

16 not provide adequate coverage to their employees. Pub. L. No. 111-148, §§ 1421, 1513. The

17 employer responsibility provision of Section 1513 of the Act will prevent “employers who do not

18 offer health insurance to their workers” from gaining “an unfair economic advantage relative to 19 those employers who do provide coverage.” H.R. Rep. No. 111-443, pt. II, at 985-86. 20 Third, the Act will subsidize insurance coverage for much of the uninsured population. 21

22 As Congress understood, nearly two-thirds of the uninsured are in families falling below 200

23 percent of the federal poverty level, H.R. Rep. No. 111-443, pt. II, at 978 (2010); see also CBO,

24 Key Issues, at 27, while 4 percent of those with income greater than 400 percent of the poverty 25 level are uninsured. CBO, Key Issues, at 11. The Act seeks to plug this gap by providing health 26 insurance tax credits and reduced cost-sharing for individuals and families with income between 27

28 133 and 400 percent of the federal poverty line, Pub. L. No. 111-148, §§ 1401-02, and expands

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1 eligibility for Medicaid to individuals with income below 133 percent of the federal poverty level 2 beginning in 2014. Id. § 2001. 3 Fourth, the Act will remove barriers to insurance coverage. As noted, it will prohibit 4

5 widespread insurance industry practices that increase premiums – or deny coverage entirely – to

6 those with the greatest need for health care. Most significantly, the Act will bar insurers from

7 refusing to cover individuals with pre-existing medical conditions. Pub. L. No. 111-148, 8 § 1201.1 9 Finally, the Act will require that all Americans, with specified exceptions, maintain a 10

11 minimum level of health insurance coverage, or pay a penalty. Pub. L. No. 111-148, §§ 1501,

12 10106, as amended by Pub. L. No. 111-152, § 1002. Congress found that this provision “is an

13 essential part of this larger regulation of economic activity,” and that its absence “would 14 undercut Federal regulation of the health insurance market.” Id. §§1501(a)(2)(H), 10106(a). 15

16 That judgment rested on detailed Congressional findings. Congress found that, by “significantly

17 reducing the number of the uninsured, the requirement, together with the other provisions of this

18 Act, will lower health insurance premiums.” Id. §§ 1501(a)(2)(F), 10106(a). Conversely, 19 Congress also found that, without the minimum coverage provision, the reforms in the Act, such 20 as the ban on denying coverage based on pre-existing conditions, would amplify existing 21

22 incentives for individuals to “wait to purchase health insurance until they needed care,” thereby

23 further shifting costs onto third parties. Id. §§ 1501(a)(2)(I), 10106(a). Congress thus found that

24 the minimum coverage provision “is essential to creating effective health insurance markets in 25

1 27 It will also prevent insurers from rescinding coverage for any reason other than fraud or misrepresentation, or declining to renew coverage based on health status. Id. §§ 1001, 1201. 28 And it will prohibit caps on the coverage available to a policyholder in a given year or over a lifetime. Id. §§ 1001, 10101(a). 7

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1 which improved health insurance products that are guaranteed issue and do not exclude coverage 2 of pre-existing conditions can be sold.” Id. 3 The CBO projects that by 2019, the reforms in the Act will reduce the number of 4

5 uninsured Americans by 32 million. Letter from Douglas W. Elmendorf, Director, CBO, to the

6 Hon. Nancy Pelosi, Speaker, U.S. House of Representatives 9 (Mar. 20, 2010) [hereinafter CBO

7 Letter to Rep. Pelosi]. It further projects that the Act’s combination of reforms, subsidies, and 8 tax credits will reduce the average premium paid by individuals and families in the individual 9 and small-group markets. Id. at 15; CBO, An Analysis of Health Insurance Premiums Under the 10

11 Patient Protection and Affordable Care Act 23-25 (Nov. 30, 2009). And CBO estimates that the

12 interrelated revenue and spending provisions in the Act – specifically including revenue from the

13 employer responsibility and minimum coverage provisions – will yield net savings to the federal 14 government of more than $100 billion over ten years. CBO Letter to Rep. Pelosi at 2. 15

16 B. Current Proceedings

17 Plaintiffs filed suit on May 14, 2010, and sought a temporary restraining order and a

18 preliminary injunction. On June 10, 2010, the Court denied the TRO, concluding that “there are 19 no allegations that plaintiffs will suffer any specific harm between now and the regularly 20 scheduled motion for preliminary injunction.” TRO Order, June 10, 2010, at 3. 21

22 C. Applicable Standards

23 The Secretary moves to dismiss the complaint for lack of subject matter jurisdiction,

24 under Rule 12(b)(1), and for failure to state a claim upon which relief can be granted, under Rule 25 12(b)(6). Plaintiffs bear the burden to show jurisdiction under Rule 12(b)(1), and the Court 26 must determine whether it has jurisdiction before addressing the merits of the complaint. See 27

28 Steel Co. v Citizens for a Better Environment, 523 U.S. 83, 94-95 (1998). Under Rule 12(b)(6),

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1 “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory 2 statements, do not suffice.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). 3 This brief also responds to plaintiffs’ motion for a preliminary injunction. A preliminary 4

5 injunction is an extraordinary remedy meant simply to preserve the status quo until a court can

6 decide the merits. See U.S. Philips Corp. v. KVC Bank N.V., 590 F.3d 1091, 1094 (9th Cir.

7 2010). Even if the Court does not dismiss the complaint, plaintiffs could not obtain a 8 preliminary injunction unless they establish: (i) that they are likely to succeed on the merits, (ii) 9 that they will likely suffer irreparable harm in the absence of preliminary relief before a final 10

11 decision, (iii) the balance of equities tips in their favor, and (iv) the injunction is in the public

12 interest.2 American Trucking, 559 F.3d at 1052 (citing standard for preliminary injunctions).

13 Plaintiffs do not attempt to make this showing, erroneously relying on now-defunct cases 14 permitting preliminary relief based on the mere possibility of irreparable harm or on the 15

16 existence of “serious questions” going to the merits. See, e.g., id.

17 ARGUMENT

18 I. Plaintiffs’ Challenges to the Employer Responsibility Provision and the 19 Minimum Coverage Provision Fail

20 Plaintiffs assert that the employer responsibility provision and the minimum coverage

21 provision exceed Congress’s constitutional powers. This Court need not reach these questions, 22 for both the Pacific Justice Institute and Mr. Baldwin lack Article III standing; neither provision 23 will take effect until 2014. For the same reason, neither plaintiff’s challenge is ripe for review. 24

25 Apart from these jurisdictional defects, the Anti-Injunction Act independently bars their suit. In

26 any case, their claims are meritless. Both provisions are justified under the Commerce Clause

27 2 Of course, the Court must first assure that it has jurisdiction when assessing the request 28 for a preliminary injunction. Munaf v. Geren, 128 S. Ct. 2207, 2219-20 (2008).

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1 and the Necessary and Proper Clause and, independently, under Congress’s power to tax and 2 spend for the general welfare. 3 A. The Court Lacks Jurisdiction Over These Claims 4

5 1. Plaintiffs Lack Standing Because Neither the Employer Responsibility Provision nor the Minimum Coverage Provision 6 Takes Effect Until 2014

7 To have standing to sue, a “plaintiff must have suffered an injury in fact — an invasion of 8 a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, 9 not conjectural or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) 10

11 (internal citations, quotation marks, and footnote omitted). Allegations of “an injury at some

12 indefinite future time” do not show an injury in fact, particularly where “the acts necessary to

13 make the injury happen are at least partly within the plaintiff’s own control.” Lujan, 504 U.S. at 14 564 n.2. In these situations, “the injury [must] proceed with a high degree of immediacy, so as to 15

16 reduce the possibility of deciding a case in which no injury would have occurred at all.” Id.

17 Plaintiffs’ allegations fail this test. The apparent basis of the Pacific Justice Institute’s

18 alleged standing is that it “does not consent to being compelled,” Dacus Decl. ¶ 8, to provide 19 qualifying health insurance to its employees or pay a penalty. Similarly, the apparent predicate 20 of Mr. Baldwin’s alleged standing is that he, too, “does not consent to being compelled by the 21

22 Act to maintain health care insurance.” Pls.’ Br. 7. Both plaintiffs insist that “Congress and the

23 President’s failure to pass constitutionally sound health care legislation undermines the rule of

24 law.” Id. at 3. These allegations frame policy objections, not a particularized injury. The 25 consent of the governed derives from the democratic process. A citizen cannot manufacture 26 standing by withholding consent from a specific law enacted through the democratic process. 27

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1 And “moral outrage, however profoundly and personally felt, does not endow [plaintiffs] with 2 standing to sue.” Smelt v. County of Orange, 447 F.3d 673, 685 (9th Cir. 2006). 3 Aside from their unhappiness with this particular product of majority rule, plaintiffs do 4

5 not even try to show that either the employer responsibility provision or the minimum coverage

6 provision currently affects them at all. This is no surprise. Neither provision takes effect until

7 January 1, 2014. Even then, if plaintiffs are subject to the coverage provisions and elect not to 8 comply, the penalties would not be payable at least until the tax returns for that year are due, i.e., 9 April 2015. This supposed injury is “too remote temporally” to support standing. McConnell, 10

11 540 U.S. 93, 226 (2003), overruled in part on other grounds by Citizens United v. FEC, 130 S.

12 Ct. 876 (2010).

13 It is no response that the employer responsibility provision and the minimum coverage 14 provision are certain to take effect in 2014. “The mere existence of a statute, which may or may 15

16 not ever be applied to plaintiffs, is not sufficient to create a case or controversy within the

17 meaning of Article III.” Scott v. Pasadena Unified Sch. Dist., 306 F.3d 646, 656 (9th Cir. 2002)

18 (internal quotation marks and citation omitted). The question is whether the statute will injure 19 the plaintiffs, and in this regard, the Institute’s claim of injury is entirely speculative. The 20 employer responsibility provision applies only to an employer with at least 50 full-time 21

22 equivalent employees. Pub. L. No. 111-148, § 1513(d)(2)(A). The Institute does not reveal how

23 many people it employs full-time – although it appears to have a small staff – and it is therefore

24 not clear whether the provision will even apply to it in 2014 or 2015. But even if the Institute 25 were to employ more than fifty people full-time in 2014, it might still satisfy the employer 26 responsibility provision. The Institute admits that it offers health insurance to its employees. 27

28 Compl. ¶ 27. That coverage may satisfy the employer responsibility provision when it goes into

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1 effect. Moreover, even if the Institute were a large employer and it were certain not to offer 2 sufficient coverage in 2014, it would not necessarily be subject to the penalty. The Institute does 3 not allege, and it is not possible to know now with certainty, that at least one of its full-time 4

5 employees would be eligible for a premium assistance tax credit or a cost-sharing reduction, and

6 that the employee would use the credit or reduction to purchase a qualifying health plan on an

7 exchange. These events are prerequisites for the Institute to be subject to the employer 8 responsibility penalty. Pub. L. No. 111-148, § 1513.3 9 The possibility of injury to Mr. Baldwin in 2014 or 2015 is at least as speculative. Mr. 10

11 Baldwin does not disclose whether he currently has health insurance. If he does, that coverage

12 may satisfy the minimum coverage provision. Even if Mr. Baldwin does not have health

13 insurance now, his personal situation could change dramatically by 2014. He might satisfy the 14 minimum coverage provision by taking a job that offers health insurance as a benefit, or by 15

16 qualifying for Medicaid or Medicare, or by choosing to purchase insurance. Given his claim that

17 he “experiences health issues relating to his prostate,” Pls.’ Br. 7, Mr. Baldwin might well

18 benefit from the new provisions that prevent insurers from refusing to cover or charging higher 19 premiums to people with preexisting conditions. As of now, however, any harm that Mr. 20 Baldwin might suffer is remote rather than imminent, speculative rather than concrete, and “at 21

22 least partly within [his] own control.” Lujan, 504 U.S. at 564 n.2. He thus lacks standing.

3 24 The Institute cannot improvise standing to challenge the employer responsibility provision by listing other provisions that go into effect sooner, such as the requirement that 25 certain insurers allow children to remain on their parents’ policies until age 26. See Pub. L. No.

26 111-148, § 1001. The Institute does not – and cannot – assert that these provisions are unconstitutional. (See Pls.’ Br. 11.) And it “cannot leverage its injuries under certain, specific 27 provisions to state an injury under the [law] generally.” Get Outdoors II, LLC v. City of San Diego, 506 F.3d 886, 892 (9th Cir. 2007). Rather, a plaintiff must “meet[] the Lujan 28 requirements for each of the provisions it wishes to challenge.” Id.

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1 2. Plaintiffs’ Claims Are Unripe 2 For similar reasons, plaintiffs’ challenges to both the minimum and employer 3 responsibility provisions are not ripe for review. The ripeness inquiry “evaluate[s] both the 4

5 fitness of the issues for judicial decision and the hardship to the parties of withholding court

6 consideration.” Abbott Labs. v. Gardner, 387 U.S. 136, 149 (1967). This case instead involves

7 “contingent future events that may not occur as anticipated, or indeed may not occur at all,” 8 Thomas v. Union Carbide Agr. Prods. Co., 473 U.S. 568, 580-81 (1985), and that do not cause a 9 hardship with a “‘direct effect on the day-to-day business of the plaintiffs,’” Grand Lodge of 10

11 Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 17-18 (D.D.C. 2001) (quoting Texas v.

12 United States, 523 U.S. 296, 301 (1998)). Plaintiffs’ challenges are unripe because no injury

13 could occur before 2014, and plaintiffs have not shown that one will occur even then. 14 3. The Anti-Injunction Act Bars Plaintiffs’ Claims 15

16 In addition, the Anti-Injunction Act, 26 U.S.C. § 7421(a), bars plaintiffs’ claims. They

17 specifically allege that the penalties under the employer responsibility and minimum coverage

18 provisions are unconstitutional taxes, see Compl. ¶ 109, and they seek to restrain their 19 assessment and collection. Plaintiffs’ claim by its terms thus come within the Anti-Injunction 20 Act, which bars a “suit for the purpose of restraining the assessment or collection of any tax . . . 21

22 in any court by any person, whether or not such person is the person against whom such tax was

23 assessed.” 26 U.S.C. § 7421(a).

24 Even if plaintiffs did not so explicitly bring their claims within the scope of the Anti- 25 Injunction Act, that statute would still bar the relief they seek. Whether or not the penalties here 26 are labeled a tax, they are, with exceptions not material, “assessed and collected in the same 27

28 manner” as other penalties under the Internal Revenue Code, 26 U.S.C. §§ 4980H(d),

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1 5000A(g)(1), and, like these other penalties, fall within the bar of the Anti-Injunction Act. 26 2 U.S.C. § 6671(a); see, e.g., Barr v. United States, 736 F.2d 1134, 1135 (7th Cir. 1984) (per 3 curiam) (“Section 6671 provides that the penalty at issue here is a tax for purposes of the Anti- 4

5 Injunction Act.”). That result is consistent with the purpose of the Anti-Injunction Act, to

6 preserve the Government’s ability to collect such assessments expeditiously with “a minimum of

7 preenforcement judicial interference” and “to require that the legal right to the disputed sums be 8 determined in a suit for refund.” Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974). 9 Under the Anti-Injunction Act, as well as the Declaratory Judgment Act,4 district courts 10

11 lack jurisdiction to order abatement of a tax liability except in a validly-filed claim for refund.

12 See Bartley v. United States, 123 F.3d 466, 467 (7th Cir. 1997). These limitations apply even

13 where, as here, plaintiffs raise a constitutional challenge to a statute that imposes a penalty. 14 United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1, 10 (2008). The Anti-Injunction Act 15

16 therefore defeats plaintiffs’ attack on the employer responsibility or minimum coverage

17 penalties.

18 B. The Comprehensive Regulatory Measures of the ACA Fall Within 19 Congress’s Article I Powers

20 Even if this Court had subject matter jurisdiction and could reach the merits of plaintiffs’

21 constitutional challenges to the Act, they would still fail. 22 1. Congress’s Authority to Regulate Interstate Commerce is Broad 23 The Constitution grants Congress power to “regulate Commerce . . . among the several 24

25 States,” U.S. Const., art. I, § 8, cl. 3, and to “make all Laws which shall be necessary and proper”

26 to the execution of that power, id. cl. 18. This grant of authority is expansive. Congress may

28 4 The Declaratory Judgment Act, 28 U.S.C. § 2201(a), similarly provides district courts with jurisdiction to grant declaratory relief “except with respect to Federal taxes.” 14

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1 “regulate the channels of interstate commerce”; it may “regulate and protect the instrumentalities 2 of interstate commerce, and persons or things in interstate commerce”; and it may “regulate 3 activities that substantially affect interstate commerce.” Raich, 545 U.S. at 16-17. The question 4

5 is not whether any one person’s conduct affects interstate commerce, but whether Congress

6 rationally concluded that the class of activities, “taken in the aggregate,” substantially affects

7 interstate commerce. Raich, 545 U.S. at 22; see also Wickard v. Filburn, 317 U.S. 111, 127-28 8 (1942). In other words, “[w]here the class of activities is regulated and that class is within the 9 reach of federal power, the courts have no power to excise, as trivial, individual instances of the 10

5 11 class.” Raich, 545 U.S. at 23 (citation and quotation omitted).

12 In exercising its Commerce Clause power, Congress may reach even wholly intrastate,

13 non-commercial matters when it concludes that doing so is necessary to a larger program 14 regulating interstate commerce. Raich, 545 U.S. at 18. Thus, when “a general regulatory statute 15

16 bears a substantial relation to commerce, the de minimis character of individual instances arising

17 under that statute is of no consequence.” Id. at 17 (internal quotation omitted). See also id. at 37

18 (Scalia, J., concurring in the judgment) (noting that Congress’s authority to make its regulation 19 of commerce effective is “distinct” from its authority to regulate matters that substantially affect 20 interstate commerce); United States v. Stewart, 451 F.3d 1071, 1076-77 (9th Cir. 2006). 21

22 In assessing congressional judgments on these issues, the Court’s task “is a modest one.”

23 Raich, 545 U.S. at 22. The Court need not itself measure the impact on interstate commerce of

24 the subject of Congress’s regulation, nor need the Court itself calculate how integral a particular 25

26 5 Plaintiffs rely on United States v. McCoy, 323 F.3d 1114 (9th Cir. 2003), as support for 27 their claim that Congress lacked the Commerce Clause authority to enact the ACA. (Pls.’ Br. 29-30.) But they fail to acknowledge that McCoy has been overruled. United States v. 28 Gallenardo, 579 F.3d 1076, 1081 (9th Cir. 2009) (applying Raich to uphold ban on child pornography produced for personal use). 15

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1 provision is to a larger regulatory program. The Court’s task instead is simply to determine 2 “whether a ‘rational basis’ exists for [Congress’s] conclusions.” Id. (quoting United States v. 3 Lopez, 514 U.S. 549, 557 (1995)). Under rational basis review, this Court may not second-guess 4 6 5 the factual record upon which Congress relied.

6 Raich and Wickard v. Filburn, 317 U.S. 111 (1942), illustrate the breadth of the

7 Commerce power and the deference accorded Congress’s judgments. In Raich, the Court 8 sustained Congress’s authority to prohibit the possession of home-grown marijuana intended 9 solely for personal use; it was sufficient that the Controlled Substances Act “regulates the 10

11 production, distribution, and consumption of commodities for which there is an established, and

12 lucrative, interstate market.” Raich, 545 U.S. at 26. Similarly, in Wickard, the Court upheld a

13 penalty on wheat grown for home consumption despite the farmer’s protests that he did not 14 intend to put the commodity on the market. It was sufficient that the existence of homegrown 15

16 wheat, in the aggregate, could “suppl[y] a need of the man who grew it which would otherwise

17 be reflected by purchases in the open market,” thus undermining the efficacy of the federal price

18 stabilization scheme. Wickard, 317 U.S. at 128. Thus, in each case, the Court sustained 19 Congress’s power to regulate even individuals who claimed not to participate in interstate 20 commerce, because these regulations were components of broad schemes regulating interstate 21

22 commerce.

23 Raich came after the Court’s decisions in United States v. Lopez, 514 U.S. 549 (1995),

24 and United States v. Morrison, 529 U.S. 598 (2000), and thus it highlights the central focus and 25 limited scope of those decisions. Unlike Raich, and unlike this case, neither Lopez nor Morrison 26

27 6 This Court accordingly may consider that record in its review of this motion to dismiss. 28 See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001); see also FED.R.EVID. 201 advisory committee’s note. 16

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1 involved regulation of economic activity. And neither case addressed a measure that was 2 integral to a comprehensive scheme to regulate activities in interstate commerce. Lopez was a 3 challenge to the Gun-Free School Zones Act of 1990, “a brief, single-subject statute making it a 4

5 crime for an individual to possess a gun in a school zone.” Raich, 545 U.S. at 23. Possessing a

6 gun in a school zone is not an economic activity. Nor was the prohibition against possessing a

7 gun “‘an essential part of a larger regulation of economic activity, in which the regulatory 8 scheme could be undercut unless the intrastate activity were regulated.’” Id. at 24 (quoting 9 Lopez, 514 U.S. at 561). Likewise, the statute at issue in Morrison simply created a civil remedy 10

11 for victims of gender-motivated violent crimes. Id. at 25. Gender-motivated violent crimes are

12 not an economic activity either, and the statute at issue focused on violence against women, not

13 on any broader regulation of economic activity.7 14 2. The ACA Regulates the Interstate Markets in Health Insurance 15 and Health Care Services 16 Regulation of a $2.5 trillion interstate market that consumes more than 17.5% of the 17 annual gross domestic product is well within the compass of congressional authority under the 18

19 Commerce Clause. Pub. L. No. 111-148, §§ 1501(a)(2)(B), 10106(a). It has long been

20 established that Congress has power to regulate insurance, see United States v. South-Eastern

21 Underwriters Ass’n, 322 U.S. 533, 553 (1944), and health care services, see Hosp. Bldg. Co. v. 22 Trs. of Rex Hosp., 425 U.S. 738, 743-44 (1976). Congress has repeatedly exercised its power 23 over health insurance by, among other measures, providing directly for government-funded 24

26 7 In addition to Lopez and Morrison, plaintiffs rely on Jones v. United States, 529 U.S. 27 848 (2000), which, in their view, holds that “Congress has no power to make a federal crime of arson.” (Pls.’ Br. 15.) Plaintiffs misread this case, too. Jones interpreted a statute, premised on 28 the Court’s understanding that Congress had not intended in that statute “to invoke its full authority under the Commerce Clause.” 529 U.S. at 854. 17

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1 health insurance through the Medicare Act, and by adopting over more than 35 years numerous 2 statutes regulating the content of policies offered by private insurers.8 3 Plaintiffs challenge two aspects of the latest reforms – the potential penalties for certain 4

5 large employers that fail to provide qualifying coverage to their employees, and the minimum

6 coverage provision. Plaintiffs’ challenge to the employer responsibility provision is spurious. A

7 law that regulates the terms of employment, including the terms by which an employer sponsors 8 health insurance for its employees, on its face regulates interstate economic matters. For that 9 reason, it has been settled for decades that such regulation is within Congress’s Commerce 10

11 Clause authority. See, e.g., United States v. Darby, 312 U.S. 100, 118 (1941) (upholding Fair

12 Labor Standards Act); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 57 (1937) (upholding

13 National Labor Relations Act). 14 Plaintiffs’ challenge to the minimum coverage provision also fails. That provision 15

16 regulates decisions about how to pay for services in the interstate health care market. These

17 decisions are quintessentially economic, and they, too, fall within the traditional scope of the

18 Commerce Clause. As Congress recognized, “decisions about how and when health care is paid 19

20 8 21 In 1974, Congress enacted the Employee Retirement and Income Security Act, Pub L. No. 93-406, 88 Stat. 829 (“ERISA”), which establishes federal requirements for health insurance 22 plans offered by private employers. A decade later, Congress passed the Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-272, 100 Stat. 82 (“COBRA”), which allows 23 workers and their families who lose their health benefits under certain circumstances the right to 24 continue receiving certain benefits from their group health plans for a time. In 1996, Congress enacted the Health Insurance Portability and Accountability Act, Pub. L. No. 104-191, 110 Stat. 25 1936 (“HIPAA”), to improve access to health insurance by, among other things, generally prohibiting group plans from discriminating against individual participants and beneficiaries 26 based on health status, requiring insurers to offer coverage to small businesses, and limiting the 27 pre-existing condition exclusion period for group plans. 26 U.S.C. §§ 9801-03; 29 U.S.C. §§ 1181(a), 1182; 42 U.S.C. §§ 300gg, 300gg-1. HIPAA added similar requirements for 28 individual insurance coverage to the Public Health Service Act. Pub. L. No. 104-191, § 111, 110 Stat. 1979. The ACA builds on these and other laws regulating health insurance. 18

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1 for, and when health insurance is purchased” are “economic and financial” and therefore 2 “commercial and economic in nature.” Pub. L. No. 111-148, §§ 1501(a)(2)(A), 10106(a).9 3 3. The Employer Responsibility and Minimum Coverage Provisions 4 Regulate Activity That Substantially Affects Interstate Commerce 5 Congress needed no extended chain of inferences to determine that decisions about how 6 to pay for health care, particularly decisions about whether to obtain health insurance or to 7

8 attempt to pay for health care out of pocket, in the aggregate substantially affect the interstate

9 health care market. Individuals who forego health insurance coverage do not thereby forego

10 health care. To the contrary, many of the uninsured will “receive treatments from traditional 11 providers for which they either do not pay or pay very little, which is known as ‘uncompensated 12

13 care.’” CBO, Key Issues, at 13; see also Council of Economic Advisers (“CEA”), The

14 Economic Case for Health Care Reform 8 (June 2009) (submitted into the record for The

15 Economic Case for Health Reform: Hearing Before the H. Comm. on the Budget, 111th Cong. 5 16 (2009). This country guarantees a minimum level of health care. The Emergency Medical 17 Treatment and Active Labor Act, 42 U.S.C. § 1395dd, for example, requires hospitals that 18

19 participate in Medicare and offer emergency services to stabilize any patient who arrives,

20 regardless of whether he has insurance or otherwise can pay for that care. CBO, Key Issues, at

21 13. In addition, most hospitals are nonprofit organizations that “have some obligation to provide 22 care for free or for a minimal charge to members of their community who could not afford it 23 otherwise.” Id. For-profit hospitals “also provide such charity or reduced-price care.” Id. 24

25 Uncompensated care, however, is not free. In the aggregate, that uncompensated cost

26 amounted to $43 billion in 2008, or about five percent of overall hospital revenues. CBO, Key

27 9 Although Congress is not required to set forth particularized findings in support of an 28 invocation of its commerce power, when, as here, it does so, courts “will consider congressional findings in [their] analysis.” Raich, 545 U.S. at 21. 19

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1 Issues, at 114. Public funds subsidize these costs. Through programs such as Disproportionate 2 Share Hospital payments, the federal government paid tens of billions of dollars in 3 uncompensated care for the uninsured in 2008 alone. H.R. Rep. No. 111-443, pt. II, at 983 4

5 (2010); see also CEA, The Economic Case, at 8. The remaining costs fall in the first instance on

6 health care providers, which in turn “pass on the cost to private insurers, which pass on the cost

7 to families.” Pub. L. No. 111-148, §§ 1501(a)(2)(F), 10106(a). This cost-shifting effectively 8 creates a “hidden tax” reflected in fees charged by providers (to the uninsured and the insured 9 alike) and in premiums charged by insurers. CEA, Economic Report of the President 187 (Feb. 10

11 2010); see also H.R. Rep. No. 111-443, pt. II, at 985 (2010); S. Rep. No. 111-89, at 2 (2009).

12 As premiums increase, more people decide not to buy coverage. This self-selection

13 further narrows the risk pool, forcing upwards the price of coverage even more for those who are 14 insured. The result is a self-reinforcing “premium spiral.” Health Reform in the 21st Century: 15

16 Insurance Market Reforms: Hearing Before the H. Comm. on Ways and Means, 111th Cong.

17 118-19 (2009) (submission for the record of American Academy of Actuaries); see also H.R.

18 Rep. No. 111-443, pt. II, at 985 (2010). Small employers particularly suffer from this premium 19 spiral, due to their relative lack of bargaining power. See H.R. Rep. No. 111-443, pt. II, at 986 20 88 (2010); Statement of Raymond Arth, Nat’l Small Business Ass’n at 5 (June 10, 2008) 21

22 (submitted into the record of 47 Million and Counting: Why the Health Care Market Is Broken:

23 Hearing Before the S. Comm. on Finance, 110th Cong. (2008)) (noting the need for insurance

24 reform and a minimum coverage provision to limit the growth of small business premiums). 25 The putative right to forego health insurance that plaintiffs champion includes decisions 26 by some to engage in market timing. These individuals will purchase insurance in later years, 27

28 but choose in the short term to incur out-of-pocket costs with the backup of emergency room

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1 services that hospitals must provide whether or not the patient can pay. See CBO, Key Issues at 2 12. By making the economic calculation to opt out of the health insurance pool during these 3 years, these individuals skew premiums upward for the insured population. Yet, when they later 4

5 need care, many of these uninsured will opt back into a system maintained in the interim by the

6 insured. In the aggregate, these economic decisions by the uninsured substantially affect the

7 interstate health care market. Congress may employ its Commerce Clause authority to address 8 these substantial, aggregate effects. See Raich, 545 U.S. at 16-17; Wickard, 317 U.S. at 127-28. 9 Plaintiffs cannot brush aside these marketplace realities by describing the decision to 10

11 forego insurance coverage as “inactivity” and therefore beyond the reach of the Commerce

12 Clause; nor are they correct that allowing regulation of such decisions abolishes all boundaries

13 on the Commerce Clause. (E.g., Pls.’ Br. 20.) Those assertions misunderstand both the nature of 14 the regulated activity and the scope of Congress’s power. Individuals who make the “economic 15

16 and financial” choice to try to pay for health care services without insurance, Pub. L. No. 111

17 148, §§ 1501(a)(2)(A), 10106(a), are not passive bystanders divorced from the health care

18 market. They have chosen a method of payment for the services they will receive, no more 19 passive than a decision to pay by credit card rather than by check. Congress specifically focused 20 on those who have such an economic choice, exempting certain individuals who cannot purchase 21

22 health insurance for religious reasons, as well as those who cannot afford insurance, or those

23 who would suffer hardship if required to purchase it. 26 U.S.C. § 5000A(d), (e). And Congress

24 found that this class of volitional economic decisions, taken in the aggregate, results each year in 25 billions of dollars in uncompensated health care costs that are passed on to governments and 26 other third parties. See, e.g., Pub. L. No. 111-148, §§ 1501(a)(2)(F), 10106(a). 27

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1 The ACA in fact regulates economic activity far more directly than provisions the 2 Supreme Court has previously sustained. In Wickard, for example, the Court upheld a system of 3 production quotas, despite the plaintiff farmer’s claim that the statute effectively required him to 4

5 purchase wheat on the open market rather than grow it himself. The Court reasoned that

6 “[h]ome-grown wheat . . . competes with wheat in commerce. The stimulation of commerce is a

7 use of the regulatory function quite as definitely as prohibitions or restrictions thereon.” 317 8 U.S. at 128; see also id. at 127 (“The effect of the statute before us is to restrict the amount 9 which may be produced for market and the extent as well to which one may forestall resort to the 10

11 market by producing to meet his own needs.”) (emphasis added). See also Heart of Atlanta

12 Motel v. United States, 379 U.S. 241, 258-59 (1964) (Commerce Clause reaches decisions not to

13 engage in transactions with persons with whom plaintiff did not wish to deal); Daniel v. Paul, 14 395 U.S. 298 (1969) (same). And in Raich, the Court likewise rejected plaintiffs’ claim that their 15

16 home-grown marijuana was “entirely separated from the market” and thus not subject to

17 regulation under the Commerce Clause. 545 U.S. at 30. Similarly, the ACA regulates the

18 conduct of a class of individuals who almost certainly will participate in the health care market, 19 who have decided to finance that participation in one particular way, and whose decisions 20 impose substantial costs on other participants in that market. Given the substantial effects of 21

22 these economic decisions on interstate commerce, Congress has authority to regulate.

23 4. The Provisions Are Integral Parts of the Larger Regulatory Scheme and Are Necessary and Proper to Congress’s 24 Regulation of Interstate Commerce 25 The minimum coverage provision is a valid exercise of Congress’s powers for a second 26 reason. The ACA’s reforms of the interstate insurance market – particularly its requirement that 27

28 insurers guarantee coverage for all individuals, even those individuals with pre-existing medical

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1 conditions – could not function effectively without the minimum coverage provision. The 2 provision is an essential part of a larger regulation of interstate commerce, and thus, under Raich, 3 is well within Congress’s Commerce Clause authority. Raich, 545 U.S. at 18. Analyzing the 4

5 minimum coverage provision under the Necessary and Proper Clause leads to the same

6 conclusion for fundamentally the same reason. See id. at 37 (Scalia, J. concurring). The

7 provision is a reasonable means to accomplish Congress’s goal of ensuring access to affordable 8 coverage for all Americans. 9 The minimum coverage provision is an “essential” part of the Act’s larger regulatory 10

11 scheme for the interstate health care market. Pub. L. No. 111-148, §§ 1501(a)(2)(H), 10106(a).

12 The Act adopts a series of measures to increase the availability and affordability of health

13 insurance, including, in particular, measures to prohibit insurance industry practices that have 14 denied coverage, or have increased premiums, for those with the greatest health care needs. 15

16 Beginning in 2014, the Act will bar insurers from refusing to cover individuals with pre-existing

17 medical conditions, and from setting eligibility rules based on health status, medical condition,

18 claims experience, or medical history. Pub. L. No. 111-148, § 1201. These provisions, which 19 directly regulate the content of insurance policies sold nationwide, are clearly within the 20 Commerce Clause power. See, e.g., South-Eastern Underwriters Ass’n, 322 U.S. at 553. 21

22 Congress found that, absent the minimum coverage provision, these new regulations

23 would encourage more individuals to forego insurance, aggravating current problems with cost-

24 shifting and increasing insurance prices. The new insurance regulations would allow individuals 25 to “wait to purchase health insurance until they needed care” – at which point the ACA would 26 obligate insurers to provide those individuals with health insurance, subject to no coverage limits 27

28 or premium adjustments, despite the pre-existing conditions they may have at that time. Pub. L.

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1 No. 111-148, §§ 1501(a)(2)(I), 10106(a). These regulations thus increase the incentives for 2 individuals to “make an economic and financial decision to forego health insurance coverage” 3 until their health care needs become substantial, id. §§ 1501(a)(2)(A), 10106(a). Without a 4

5 minimum coverage provision, this market timing would increase the costs of uncompensated

6 care and the premiums for the insured pool, creating pressures that would “inexorably drive [the

7 health insurance] market into extinction.” Health Reform in the 21st Century, at 13 (written 8 statement of Uwe Reinhardt, Ph.D., Professor of Political Economy, Economics, and Public 9 Affairs, Princeton University).10 Congress thus found the minimum coverage provision to be 10

11 “essential” to its broader effort to regulate underwriting practices that prevented many from

12 obtaining health insurance, Pub. L. No. 111-148, §§ 1501(a)(2)(H), (I), 10106(a).

13 In other respects as well, the minimum coverage provision is essential to the Act’s 14 comprehensive regulatory scheme to ensure that health insurance is available and affordable. 15

16 The provision works in tandem with the Act’s reforms to reduce the upward pressure on

17 premiums caused by the practice of medical underwriting. This process of individualized review

18 of an applicant’s health status results in administrative fees that are responsible for 26 to 30 19 percent of the cost of premiums in the individual and small group markets. Pub. L. No. 111-148, 20 §§ 1501(a)(2)(J), 10106(a). And medical underwriting yields substantially higher risk-adjusted 21

22 premiums or outright denial of insurance coverage for an estimated one-fifth of applicants.

23 CBO, Key Issues, at 81. The minimum coverage requirement helps to counteract these pressures

25 10 See also id. at 101-02 (testimony of Dr. Reinhardt); id. at 123-24 (submission for the 26 record of National Association of Health Underwriters) (observing, based on the experience of 27 “states that already require guaranteed issue of individual policies, but do not require universal coverage,” that “[w]ithout near universal participation, a guaranteed-issue requirement . . . would 28 have the perverse effect of encouraging individuals to forego buying coverage until they are sick or require sudden and significant medical care”). 24

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1 by significantly increasing health insurance coverage and the size of purchasing pools, and 2 thereby increasing economies of scale. Pub. L. No. 111-148, §§ 1501(a)(2)(J), 10106(a). 3 Congress thus found that the minimum coverage provision is an integral part of the 4

5 ACA’s “comprehensive framework for regulating” health care and health insurance, Raich, 545

6 U.S. at 24. Congress had ample basis to conclude that not regulating this “class of activity”

7 would “undercut the regulation of the interstate market” in health care and health insurance. 8 Raich, 545 U.S. at 18; see id. at 37 (Scalia, J., concurring in the judgment) (“Congress may 9 regulate even noneconomic local activity if that regulation is a necessary part of a more general 10

11 regulation of interstate commerce”).

12 Because the minimum coverage provision is essential to Congress’s overall regulatory

13 reform of the interstate health care and health insurance markets, it is also a valid exercise of 14 Congress’s authority under the Necessary and Proper Clause, U.S. Const., art. I, § 8, cl. 18, to 15

16 accomplish that goal. “[T]he Necessary and Proper Clause grants Congress broad authority to

17 enact federal legislation.” United States v. Comstock, 130 S. Ct. 1949, 1956 (2010). It has been

18 settled since M’Culloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), that this clause affords 19 Congress the power to employ any means “reasonably adapted to the end permitted by the 20 Constitution.” Hodel v. Va. Surface Mining & Reclamation Ass’n, 452 U.S. 264, 276 (1981) 21

22 (internal quotation omitted). And when Congress legislates in furtherance of a legitimate end, its

23 choice of means is accorded broad deference. See Sabri v. United States, 541 U.S. 600, 605

24 (2004); see also Comstock, 130 S. Ct. at 1956-57. “[W]here Congress has the authority to enact 25 a regulation of interstate commerce, ‘it possesses every power needed to make that regulation 26 effective.’” Raich, 545 U.S. at 36 (Scalia, J., concurring in the judgment) (quoting United States 27

28 v. Wrightwood Dairy Co., 315 U.S. 110, 118-19 (1942)). As demonstrated above, see X-Y,

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1 Congress reasonably found that the minimum coverage provision not only is adapted to, but is 2 “essential” to achieving key reforms of the interstate health care and health insurance markets. 3 5. The Provisions Are Valid Exercises of Congress’s Independent 4 Power under the General Welfare Clause 5 Plaintiffs’ challenge to the ACA fails on the merits because of Congress’s General 6 Welfare Clause power as well. Independent of its Commerce Clause authority, Congress is 7

8 vested with the “Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts

9 and provide for the common Defence and general Welfare of the United States[.]” U.S. Const.,

10 art. I, § 8, cl. 1. The power of Congress to use its taxing and spending power under the General 11 Welfare Clause has long been recognized as “extensive.” License Tax Cases, 72 U.S. (5 Wall.) 12

13 462, 471 (1867); see also Charles C. Steward Mach. Co. v. Davis, 301 U.S. 548, 581 (1937).

14 Congress may use its power under this Clause even for purposes that would exceed its powers

15 under the other provisions of Article I. See United States v. Sanchez, 340 U.S. 42, 44 (1950) 16 (“Nor does a tax statute necessarily fall because it touches on activities which Congress might 17 not otherwise regulate.”). 18

19 To be sure, Congress must use this power under Article I, Section 8, Clause 1 to “provide

20 for the . . . general Welfare.” But, as the Supreme Court held 75 years ago with regard to the

21 Social Security Act, decisions of how best to provide for the general welfare are for the 22 representative branches, not for the courts. Helvering v. Davis, 301 U.S. 619, 640 (1937); id. at 23 645 & n.10. See also South Dakota v. Dole, 483 U.S. 203, 207 (1987). 24

25 The employer responsibility and minimum coverage provisions fall within Congress’s

26 “extensive” General Welfare authority. Employers who are subject to § 1513, and who fail to

27 provide coverage to their employees, are assessed a penalty payable with their employment-tax 28 filings. Pub. L. No. 111-148, § 1513. The Act similarly requires individuals not otherwise 26

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1 exempt to obtain “minimum essential coverage” or pay a penalty. Id., § 1501(b), as amended by 2 Pub. L. No. 111-152, § 1002 (adding 26 U.S.C. § 5000A(a), (b)(1)). Congress placed these 3 provisions in the Internal Revenue Code, as part of a subtitle labeled “Miscellaneous Excise 4

5 Taxes.” With respect to the latter provision, individuals who are not required to file income tax

6 returns for a given year are not subject to this provision. 26 U.S.C. § 5000A(e)(2). In general,

7 the penalty is calculated as the greater of a fixed amount or a percentage of the individual’s 8 household income, but cannot exceed the national average premium for the lowest-tier plans 9 offered through health insurance exchanges for the taxpayer’s family size. 26 U.S.C. 10

11 § 5000A(c)(1), (2). The individual must report the penalty on his return for the taxable year, as

12 an addition to his income tax liability. 26 U.S.C. § 5000A(b)(2). The penalty is assessed and

13 collected in the same manner as other assessable penalties imposed under the Internal Revenue 14 Code.11 15

16 That these provisions have regulatory purposes does not place them beyond Congress’s

12 17 taxing power. Sanchez, 340 U.S. at 44 (“[A] tax does not cease to be valid merely because it

18 regulates, discourages, or even definitely deters the activities taxed); see also United States v. 19 Kahriger, 345 U.S. 22, 27-28 (1953); cf. Bob Jones Univ., 416 U.S. at 741 n.12 (Court has 20

22 11 The Secretary of the Treasury may not collect the penalty by means of notices of federal liens or levies, and may not bring a criminal prosecution for a failure to pay the penalty. 23 26 U.S.C. § 5000A(g)(2). The revenues derived from the minimum coverage penalty are paid 24 into general revenues.

25 12 Congress has long used the taxing power as a regulatory tool, and in particular as a tool to regulate how health care is paid for in the national market. HIPAA, for example, limits 26 the ability of group health plans to exclude or terminate applicants with pre-existing conditions, 27 and imposes a tax on any such plan that fails to comply with these requirements. 26 U.S.C. §§ 4980D, 9801-03. In addition, the Internal Revenue Code requires group health plans to offer 28 COBRA continuing coverage to terminated employees, and similarly imposes a tax on any plan that fails to comply with this mandate. 26 U.S.C. § 4980B. 27

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1 “abandoned” older “distinctions between regulatory and revenue-raising taxes”).13 So long as a 2 statute is “productive of some revenue,” the courts will not second-guess Congress’s exercise of 3 its General Welfare Clause powers, and “will not undertake, by collateral inquiry as to the 4

5 measure of the regulatory effect of a tax, to ascribe to Congress an attempt, under the guise of

6 taxation, to exercise another power denied by the Federal Constitution.” Sonzinsky v. United

7 States, 300 U.S. 506, 514 (1937). 8 The minimum coverage provision, like the employer responsibility provision, easily 9 meets this standard. The nonpartisan Joint Committee on Taxation included these provisions in 10

11 its review of the “Revenue Provisions” of the Act and the Reconciliation Act, analyzing them as

12 a “tax,” an “excise tax,” and a “penalty.”14 Moreover, the Joint Committee, along with the CBO,

13 repeatedly predicted how much revenue the provisions would raise and considered those 14 amounts in determining the impact of the bill on the deficit. The CBO estimated that the 15

16 provisions together would produce about $14 billion in annual revenue. CBO Letter to Rep.

17 Pelosi at tbl. 4 at 2. Thus, as Congress recognized, these provisions produce revenue alongside

18 their regulatory purposes, which is all that Article I, Section 8, Clause 1 requires. 19 In any event, just as a court should interpret the “words of a statute . . . in their context 20 and with a view to their place in the overall statutory scheme,” FDA v. Brown & Williamson 21

22 13 Nor does the statutory label of the minimum coverage provision as a “penalty” matter. 23 “[In] passing on the constitutionality of a tax law [the Court is] concerned only with its practical 24 operation, not its definition or the precise form of descriptive words which may be applied to it.” Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 363 (1941) (internal quotation omitted). See also 25 Simmons v. United States, 308 F.2d 160, 166 n.21 (4th Cir. 1962) (“[I]t has been clearly

26 established that the labels used do not determine the extent of the taxing power.”).

14 27 See Joint Comm. on Taxation, 111th Cong., Technical Explanation of the Revenue Provisions of the “Reconciliation Act of 2010,” as amended, in Combination with the “Patient 28 Protection and Affordable Care Act” 31, 37 (Mar. 21, 2010); see also Joint Comm. on Taxation, Report JCX-47-09 (Nov. 5, 2009). 28

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1 Tobacco Corp., 529 U.S. 120, 133 (2000) (internal quotation omitted), so, too, the Court should 2 analyze the purpose and function of the employer responsibility and minimum coverage 3 provisions in context, as an integral part of the overall statutory scheme it advances. Congress 4

5 reasonably concluded, for example, that the minimum coverage provision would increase the

6 number of persons with insurance, permit the restrictions imposed on insurers to function

7 efficiently, and lower insurance premiums. Pub. L. No. 111-148, §§ 1501(a), 10106(a). And 8 Congress determined, also with substantial reason, that this provision was essential to the success 9 of its comprehensive scheme of health insurance reform. Congress acted well within its 10

11 prerogatives under the General Welfare Clause to include the minimum coverage provision as an

12 integrated component of the interrelated revenue and spending provisions in the Act, and as a

13 measure necessary and proper to the overall goal of advancing the general welfare. See, e.g., 14 Buckley v. Valeo, 424 U.S. 1, 90 (1976) (grant of power under the General Welfare Clause “is 15

16 quite expansive, particularly in view of the enlargement of power by the Necessary and Proper

15 17 Clause”).

18 II. Mr. Baldwin’s Direct Tax and Origination Clause Claims Should Be Dismissed 19 Mr. Baldwin alleges that the penalty in Section 1501 of the Act for a failure to obtain 20 minimum coverage is invalid because it is a “direct tax” which must be apportioned among the 21

22 states by population under Sections 2 and 9 of Article I. (Pls.’ Br. 34-37.) He alternatively

23 argues that Section 1501 and the Act as a whole are invalid because the Act did not originate in

25 15 Plaintiffs also argue that, by passing the ACA, Congress “effectively expanded its enumerated powers under Article I, § 8,” thus supposedly circumventing the constitutional 26 amendment procedures prescribed by Article V. (Pls.’ Br. 40-41). This claim simply rehashes 27 plaintiffs’ constitutional objections to the statute. The employer responsibility and minimum coverage provisions do not and cannot add anything to Article I; rather, these provisions 28 constitute wholly legitimate exercises of Congress’s authority under the Commerce Clause and, alternatively, the General Welfare Clause. 29

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1 the House of Representatives, as is required for “Bills for raising Revenue” under Article I, 2 Section 7. (Pls.’ Br. 34-39.) As an initial matter, Mr. Baldwin lacks standing to assert either of 3 these claims; both are based on the minimum coverage provision, which does not take effect 4

5 until 2014, and may not affect him even then. For the same reason, these claims are not ripe for

6 review, and are separately barred by the Anti-Injunction Act. See supra at 10-14.

7 In any event, neither the Direct Tax Clauses nor the Origination Clause limit Congress’s 8 power under the Commerce Clause, a principal source of Congressional authority to enact this 9 legislation. See Moon v. Freeman, 379 F.2d 382, 391 (9th Cir. 1967) (exercises of commerce 10

11 power cannot be direct taxes); South Carolina v. Block, 717 F.2d 874, 887 (4th Cir. 1983)

12 (exercises of commerce power are not subject to Origination Clause). Accordingly, if the Court

13 upholds the Act under the Commerce Clause, it need not reach these questions. In any event, the 14 minimal limitations of the Direct Tax Clauses and the Origination Clause would be satisfied even 15

16 if Section 1501 were analyzed only under the General Welfare Clause.

17 A. Mr. Baldwin Cannot Prevail on His Direct Tax Claim

18 Article I, Section 9 of the Constitution provides that “[n]o Capitation, or other direct, Tax 19 shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be 20 taken.” U.S. Const. art. I, § 9, cl. 4 (amended by U.S. Const. amend. XVI). Section 2 of Article 21

22 I similarly requires apportionment of direct taxes. U.S. Const. art. I, § 2, cl. 3 (amended by U.S.

23 Const. amends. XIV and XVI). Mr. Baldwin contends that the minimum coverage provision

24 imposes a direct tax, and that the provision is therefore invalid because that the tax is not 25 apportioned by population among the states. (Pls.’ Br. 34-37.) His argument is unavailing. It 26 has long been understood that only a very narrow category of taxes qualify as “direct” for 27

28 purposes of this apportionment requirement – taxes imposed on the ownership of property, or

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1 taxes imposed on an individual without any variation for the individual’s particular 2 circumstances. The minimum coverage provision does not fall within this narrow definition. 3 The direct tax clauses were added to the Constitution as part of the compromise that 4

5 counted slaves as three-fifths of a person for the purposes of allocating representatives in the

6 House. U.S. Const. art. I, § 2, cl. 3 (amended by U.S. Const., amend. XIV, § 2). Any effort, for

7 example, to impose a tax on slaves would fall disproportionately on non-slaveholding states, as it 8 would have to be apportioned by population, with the slave-holding states paying less per capita 9 because of the three-fifths rule. See Bruce Ackerman, Taxation and the Constitution, 99 Colum. 10

11 L. Rev. 1, 8-13 (1999). As Justice Paterson explained in one of the Supreme Court’s first

12 landmark opinions, the “rule of apportionment” was “the work of a compromise” that “cannot be

13 supported by any solid reasoning” and that “therefore, ought not to be extended by construction.” 14 Hylton v. United States, 3 U.S. (3 Dall.) 171, 178 (1796) (opinion of Paterson, J.). The courts 15

16 have accordingly construed the direct tax clauses narrowly to mean only capitation taxes and

17 taxes on real property. See, e.g., Springer v. United States, 102 U.S. 586, 602 (1880); Veazie

18 Bank v. Fenno, 75 U.S. (8 Wall.) 533, 543 (1869); Hylton v. United States, 3 U.S. (3 Dall.) 171 19 (1796). 20 Briefly and controversially, the Supreme Court departed from this pattern of strict 21

22 construction to expand the definition of a “direct tax” to include a tax on the ownership of

23 personal property, as well as on income derived from real or personal property. See Pollock v.

24 Farmers’ Land & Trust Co., 158 U.S. 601 (1895). The latter aspect of Pollock’s holding was 25 directly overruled by the Sixteenth Amendment, which clarifies the Congressional power to 26 impose taxes on incomes “from whatever source derived” without apportionment. U.S. Const., 27

28 amend. XVI. The continued validity of the first aspect of its holding – that taxes imposed on the

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1 ownership of personal property are “direct” – is in doubt. See Ackerman, 99 Colum. L. Rev. at 2 51-52. At most, Pollock stands today for the proposition that a general tax on the whole of an 3 individual’s personal property would be treated as direct. See Union Elec. Co. v. United States, 4

5 363 F.3d 1292, 1300 (Fed. Cir. 2004).

6 Whatever the scope of Pollock may be, a tax imposed on the occurrence of an event, as

7 opposed to one imposed directly on the ownership of property, has always been understood to be 8 indirect. United States v. Mfrs. Nat’l Bank of Detroit, 363 U.S. 194, 197-98 (1960); Tyler v. 9 United States, 281 U.S. 497, 502 (1930). Only a tax imposed on property, “solely by reason of 10

11 its ownership,” is a “direct tax” within the constitutional meaning. Knowlton v. Moore, 178 U.S.

12 41, 81 (1900). Given the narrow scope of this definition, no provision has been invalidated as an

13 unapportioned direct tax since Eisner v. Macomber, 252 U.S. 189, 206 (1920), which treated a 14 tax on stock dividends as a tax on the ownership of property. Macomber itself has long since 15

16 been discredited, see, e.g., Vukasovich, Inc. v. Commissioner, 790 F.2d 1409, 1414 (9th Cir.

17 1986); Union Elec. Co., 363 F.3d at 1302 n.11.

18 The minimum coverage provision does not impose a tax on any property, real or 19 personal. It instead imposes a penalty on the occurrence of an event – foregoing insurance 20 coverage, a volitional act that imposes external costs on employers and insured individuals who 21

22 pay premiums, as well as on health care providers and the federal and state governments. As a

23 penalty predicated on conduct, as opposed to one on property, it is not a direct tax, and it need

24 not be allocated under Article I, Section 9. See Mfrs. Nat’l Bank, 363 U.S. at 197-98; see also 25 Murphy v. IRS, 493 F.3d 170, 184 (D.C. Cir. 2007). 26 Nor is the minimum coverage provision a “capitation tax” within the meaning of Article 27

28 I, Section 9. Justice Chase explained that a capitation tax is one imposed “simply, without

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1 regard to property, profession, or any other circumstance.” Hylton, 3 U.S. at 175 (opinion of 2 Chase, J.); see also Pac. Ins. Co. v. Soule, 74 U.S. (7 Wall.) 433, 444 (1868); Veazie Bank, 75 3 U.S. at 540-44. The Supreme Court has never invalidated a taxing provision as a capitation tax, 4

5 and the minimum coverage provision cannot be the first. It does not impose a flat tax without

6 regard to the taxpayer’s circumstances. To the contrary, among other exemptions, the Act

7 excuses persons with household incomes below the threshold for filing a tax return, as well as 8 those for whom qualifying coverage would cost more than 8% of their household income. 26 9 U.S.C. § 5000A(e)(1), (2). The amount of the tax further varies with the taxpayer’s income, 10

11 subject to a floor of a particular dollar amount, and to a cap equal to the cost of qualifying

12 coverage. 26 U.S.C. § 5000A(c)(1), (2). See also U.S. Const. amend. XVI. And, of course, the

13 tax does not apply at all so long as the taxpayer obtains qualifying coverage. 26 U.S.C. 14 § 5000A(a), (b)(1). The minimum coverage provision thus is tailored to the individual’s 15

16 circumstances, and is not a capitation tax.

17 B. Mr. Baldwin Cannot Prevail on His Origination Clause Claim

18 The Origination Clause provides that “[a]ll Bills for raising Revenue shall originate in the 19 House of Representatives; but the Senate may propose or concur with Amendments as on other 20 Bills.” U.S. Const. art. I, § 7. The limits this clause imposes on Congress are minimal, which 21

22 likely explains why the Supreme Court has reviewed only five Origination Clause claims in its

23 history and has never invalidated an Act of Congress on that basis. Plaintiffs present no reason

24 to break new ground. The Act originated in the House and, in any event, is not a “Bill for raising 25 Revenue” within the meaning of the Origination Clause. 26 First, the bill that became the ACA originated in the House as H.R. 3590, a revenue- 27

28 raising bill. After the bill passed the House, the Senate amended it by striking its text and

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1 substituting the provisions that ultimately became the Act. After passage in the Senate, the 2 House agreed to the bill as amended, and the enrolled bill was submitted to the President, who 3 signed it into law.16 This commonplace procedure satisfied the minimal constraints of the 4

5 Origination Clause. Article I, Section 7 provides that “the Senate may propose or concur with

6 Amendments [of bills for raising revenue] as on other Bills.” Accordingly, the Senate may adopt

7 any amendment it deems advisable to a bill relating to revenues, even an amendment that is a 8 total substitute. See Flint v. Stone Tracy Co., 220 U.S. 107, 143 (1911) (Senate amendment 9 substituting a corporation tax for an inheritance tax was valid); see also Boday v. United States, 10

11 759 F.2d 1472, 1476 (9th Cir. 1985); Armstrong v. United States, 759 F.2d 1378, 1381-82 (9th

12 Cir. 1985); Harris v. IRS, 758 F.2d 456, 458 (9th Cir. 1985).

13 Mr. Baldwin contends that the Senate amendments were not “germane” to H.R. 3590. 14 (Pls.’ Br. 37.) But the question whether an amendment is germane is entrusted not to this Court, 15

16 but instead to the Senate in proposing the amendment, and to the House in accepting it. “Having

17 become an enrolled and duly authenticated act of Congress, it is not for this court to determine

18 whether the amendment was or was not outside the purposes of the original bill.” Rainey v. 19 United States, 232 U.S. 310, 317 (1914); see also United States v. Munoz-Flores, 495 U.S. 385, 20 410 (1990) (Scalia, J., concurring in the judgment). Congress determined that H.R. 3590 as it 21

22 first passed the House and as it was amended by the Senate were both sufficiently related to the

25 16 This Court need only determine that the bill that became the ACA originated as H.R. 3590 to hold that the Origination Clause is satisfied. A more detailed analysis of the legislative 26 history of the Act confirms this result, however. A minimum coverage provision was first 27 passed in a separate House-originated bill. H.R. 3962, § 501. The Senate amendments in the bill that became the ACA tracked this provision in large measure. And the House and Senate 28 amended the minimum coverage provision and other provisions relating to revenues in HCERA, Pub. L. No. 111-152, which also originated in the House. H.R. 4862. 34

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1 subject of revenue collection for the amendments to be germane; this Court may not second- 2 guess that judgment. See Armstrong, 759 F.2d at 1382; Harris, 758 F.2d at 458. 3 Second, the Act in any event is not a “Bill for raising Revenue” under Article I, Section 4

5 7. Although, as noted above, Congress exercised its powers under the General Welfare Clause as

6 well as under the Commerce Clause when it enacted the ACA, that did not convert the Act into a

7 “Bill for raising Revenue.” It is not sufficient that the bill generate revenue. Rather, generating 8 revenue must be its key purpose. As the Supreme Court has stated, “revenue bills are those that 9 levy taxes, in the strict sense of the word, and are not bills for other purposes which may 10

11 incidentally create revenue.” Twin City Bank v. Nebeker, 167 U.S. 196, 202-03 (1897). Thus, a

12 statute that is valid under the General Welfare Clause, because it is productive of some revenue,

13 need not originate in the House of Representatives under the Origination Clause if that revenue is 14 incidental to the overall purpose of the statute. See Texas Office of Pub. Util. Counsel v. F.C.C., 15

16 183 F.3d 393, 427 (5th Cir. 1999) (observing that “Taxing Clause and Origination Clause

17 challenges . . . represent separate lines of analysis”). The Supreme Court has long understood

18 that only a narrow class of bills is “for raising Revenue” and so subject to the Origination Clause. 19 In both Nebeker and Millard v. Roberts, 202 U.S. 429 (1906), the Court held that an assessment 20 that Congress had labeled as a “tax” was not subject to the Origination Clause, because each bill 21

22 was designed to serve other purposes, even though it incidentally generated revenue. In

23 Nebeker, the challenged provision of the National Bank Act taxed the circulating notes of

24 banking associations. 167 U.S. at 202-03. The Court concluded that the provision was not a bill 25 for raising revenue within the meaning of the Origination Clause because “the tax was a means 26 for effectually accomplishing the great object of giving to the people a currency,” rather than “to 27

28 raise revenue to be applied in meeting the expenses or obligations of the government.” Id. at

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1 203. Similarly, in Millard, the Court rejected an Origination Clause challenge to provisions 2 levying taxes on property within the District of Columbia to finance railroad construction. 202 3 U.S. at 437. Again, the Court determined that the challenged measures were not subject to the 4

5 Origination Clause because “[w]hatever taxes are imposed are but means to the purposes

6 provided by the act.” Id.

7 Most recently, in United States v. Munoz-Flores, 495 U.S. 385 (1990), the Court rejected 8 a challenge to a provision of the Victims of Crime Act of 1984 that required courts to impose a 9 monetary “special assessment” on any person convicted of a federal misdemeanor offense. 495 10

11 U.S. at 401. The Court concluded the provision was not a bill for raising revenue because the

12 funds collected from special assessments were used primarily to support programs that

13 compensate and assist crime victims. Id. at 398-400. The Court reached this conclusion even 14 though the challenged statute provided a mechanism for some of the funds collected to be 15

16 deposited into the general fund of the Treasury; the Court reasoned that “[a]ny revenue for the

17 general Treasury that [the special assessment provision] creates is [only] incidental to [the]

18 provision’s primary purpose” of compensating and assisting crime victims. Id. at 399. 19 Under this standard, the ACA is not a “Bill[] for raising Revenue.” (Emphasis supplied.) 20 The provisions of the Act that generate revenue, see, e.g., Pub. L. No. 111-148, §§ 1501, 10106 21

22 (minimum coverage provision); id. § 1513 (employer responsibility provision), are not designed

23 with a primary purpose “to raise revenue to be applied in meeting the expenses or obligations of

24 the government;” Nebeker, 167 U.S. at 202-203; they are “but means to the purposes provided by 25 the [A]ct.” Millard, 202 U.S. at 437. The central purpose of the Act, and of those provisions, is 26 to reform the nation’s health care system, to reduce the number of uninsured Americans, and to 27

28 staunch the escalating costs of the health care system. The Act accomplishes these purposes

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1 through a series of interrelated provisions, many, if not most of which have nothing to do with 2 raising revenue. Congress could properly exercise its authority under the General Welfare 3 Clause to include the minimum coverage provision, and in particular the penalty of that 4

5 provision, with the intent to generate revenue, but, as the statute was not primarily a revenue

6 measure, the Origination Clause does not apply.

7 III. The Claims under the Due Process Clause, Federal Rule of Evidence 501, and 8 California Rule of Evidence 992 Are Meritless

9 Mr. Baldwin also raises claims involving his purported due process right not to purchase

10 health insurance and the supposed violation of the physician-patient privilege under the Federal 11 Rules of Evidence and the California Rules of Evidence. Compl. ¶¶ 132-58. At the threshold, he 12

13 plainly lacks standing to assert any of these unripe claims, as they all trace to the minimum

14 coverage provision, which does not take effect until 2014. See supra at 10-14. Even if he had

15 standing, the Anti-Injunction Act would bar his claim to forestall the penalty. In any event, these 16 claims seek to resurrect a long-overruled line of cases and mischaracterize the provisions they 17 challenge. None has any legal basis. 18

19 Contrary to Mr. Baldwin’s view, the Supreme Court has never recognized a fundamental

20 right not to purchase health insurance. The Due Process Clause protects only those fundamental

21 liberty interests that are “objectively, deeply rooted in this Nation’s history and tradition, and 22 implicit in the concept of ordered liberty, such that neither liberty nor justice would exist if they 23 were sacrificed.” Washington v. Glucksberg, 521 U.S. 702, 720-21 (1997) (internal quotation 24

25 omitted). These freedoms include the “rights to marry,” “to have children,” “to direct the

26 education and upbringing of one’s children,” “to marital privacy,” “to use contraception,” “to

27 bodily integrity,” “to abortion,” and possibly “to refuse unwanted lifesaving medical treatment.” 28 Id. at 720. The Supreme Court has cautioned against recognizing new fundamental rights, “lest 37

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1 the liberty protected by the Due Process Clause be subtly transformed into the policy preferences 2 of the Members of this Court.” Id. 3 No ostensible “right” to forego health insurance and to shift one’s health care costs to 4

5 third-parties falls into any of these categories. No such right is “deeply rooted in this Nation’s

6 history and tradition.” No such right is a prerequisite to liberty. Glucksberg, 521 U.S. at 720.

7 Indeed, Mr. Baldwin’s purported interest in foregoing insurance coverage is purely economic. 8 And the Court long ago overruled the discredited line of authority embodied by Lochner v. New 9 York, 198 U.S. 45 (1905), that suggested some fundamental right to avoid economic regulation. 10

11 See, e.g., West Coast Hotel Co. v. Parrish, 300 U.S. 379, 392 (1937); Nebbia v. New York, 291

12 U.S. 502 (1934). Today, it is well accepted that contract rights, like other economic rights, are

13 subject to reasonable regulations. See, e.g., Lincoln Fed. Labor Union v. Nw. Iron & Metal Co., 14 335 U.S. 525, 536 (1949); West Coast Hotel Co., 300 U.S. at 392 (“[F]reedom of contract is a 15

16 qualified and not an absolute right. . . . Liberty implies the absence of arbitrary restraint, not

17 17 immunity from reasonable regulations.”).

18 Because any liberty or property interests the Act may affect are not “fundamental,” 19 Plaintiffs’ due process claim is subject to rational basis review. It is well established that 20 legislative acts “adjusting the burdens and benefits of economic life come to the Court with a 21

22 presumption of constitutionality, and that the burden is on one complaining of a due process

23 violation to establish that the legislature has acted in an arbitrary and irrational way.” Usery v.

24 Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976). Accordingly, the Supreme Court has not 25

26 17 Although Mr. Baldwin insists that the minimum coverage provision denies him the 27 right to “request or deny medical care,” Pls.’ Br. 31, the provision does nothing of the sort. Rather, it requires him, if he does not have qualifying health insurance in 2014, to purchase such 28 coverage or pay a penalty. Nothing in the Act dictates, suggests, or even hints at some obligation to submit to unwanted medical treatment nor does it deny anyone the right to request treatment. 38

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1 invalidated any economic or social welfare legislation on substantive due process grounds since 2 the 1930s. Erwin Chemerinsky, Constitutional Law 625 (3d ed. 2006). 3 The Act as a whole, and the minimum coverage provision in particular, meets this 4

5 standard. Congress passed the ACA to address the mounting costs imposed on the economy, the

6 government, and the public as a result of the inability of millions of Americans to obtain

7 affordable health insurance and health care services. Without question, these are legitimate 8 legislative aims. And Congress sensibly found that the minimum coverage provision was 9 necessary to facilitate the insurance reforms in the Act. See supra at 22-25. 10

11 Similarly chimerical are Mr. Baldwin’s challenges to provisions that purportedly require

12 him to submit to some unspecified, unwanted medical treatment, invade physician-patient

13 privileged communications, or require him to disclose personal information. Pls.’ Br. 31-33. 14 Specifically, Mr. Baldwin cites sections 1002, 1331, 3015, and 3504 of the ACA which, he 15 18 16 insists, violate Federal Rule of Evidence 501 and California Rule of Evidence 992.

17 This Court need not resolve whether, contrary to existing precedent, Mr. Baldwin has a

18 cause of action under the Federal Rules of Evidence, see In re Madison Guar. Savings and Loan 19 Ass’n, 173 F.3d 866, 869 (D.C. Cir. 1999), nor need it explore how a state rule of evidence could 20 somehow trump a federal statute, see U.S. Const. art. VI, cl. 2, because the underlying premise of 21

22 Mr. Baldwin’s argument is flatly wrong. The provisions he cites do not require him to undergo

23 any medical treatment or disclose any confidential or personal information. Section 1002 awards

24 grants to states to enable the states to establish or expand offices of health insurance consumer 25 assistance. Section 1331 gives states the option to establish basic health programs for 26 individuals not eligible for Medicaid. Section 3015 directs the Secretary to “collect and 27

28 18 Mr. Baldwin also cites to Section 1441 of the Act, which does not exist. 39

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1 aggregate consistent data on quality and resource use measures from information systems used to 2 support health care delivery.” Section 3504 requires the Secretary to design and implement 3 regionalized systems for emergency care. Even on the most conspiratorial reading, none of these 4

5 provisions compels or threatens to compel Mr. Baldwin to submit to unwanted medical care or to

6 disclose personal information. These claims should accordingly be dismissed.

7 IV. Mr. Baldwin Cannot Prevail on His Claim that the ACA Violates Equal 8 Protection

9 Mr. Baldwin argues that the ACA violates the equal protection component of the Fifth

10 Amendment’s Due Process Clause by establishing governmental offices, supposedly with 11 unlimited resources, to coordinate women’s health issues, without establishing corresponding 12 19 13 offices for men’s health issues. (Pls.’ Br. 41-46, citing Pub. L. No. 111-148, § 3509(a)-(g).)

14 Aside from being – again – factually inaccurate, this claim fails both on standing and the merits.

15 Mr. Baldwin lacks standing because he does not (i) identify a concrete injury in fact that (ii) is 16 not widely shared in equal measure. And as for the merits, by no stretch of law or logic do the 17 women’s health offices pose constitutional difficulties. They serve an important purpose— 18

19 advancing research into women’s health issues—in a health care system designed to further the

20 health needs of both men and women.

21 The ACA furnishes a statutory foundation for five women’s health offices that previously 22 lacked such footing.20 See Pub. L. No. 111-148, §§ 3509(a)-(b), (e)-(g). Contrary to plaintiffs’ 23

24 19 The Fifth Amendment contains an equal protection guarantee like that enshrined in the 25 Fourteenth Amendment. Bolling v. Sharpe, 347 U.S. 497, 500 (1954).

26 20 These offices are the Office on Women’s Health in HHS, the Office of Women’s 27 Health in the Centers for Disease Control and Prevention (“CDC”), the Office of Women’s Health and Gender-Based Research in the Agency for Health Research and Quality, the Office of 28 Women’s Health in the FDA, and the Office of Women’s Health in the Health Resources and Services Administration. 40

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1 assertions, however, the Act did not create those offices. They have existed for years. See, e.g., 2 HHS Website, Office on Women’s Health (http://www.womenshealth.gov/owh/about/) (accessed 3 on June 25, 2010) (office has existed since 1991); CDC Website, CDC/ATSDR Office of 4

5 Women’s Health (http://www.cdc.gov/women/about/index.htm) (accessed on June 25, 2010)

6 (office was established in 1994).

7 Mr. Baldwin cannot establish the basic prerequisite of standing to challenge the ACA’s 8 provision concerning women’s health offices – a concrete injury traceable to the ACA that is 9 likely to be redressed by the order he seeks. See Hollander v. Inst. for Research on Women & 10

11 Gender at Columbia Univ., 2009 WL 1025960 (S.D.N.Y. 2009). His displeasure that the ACA

12 does not comport with his notion of equal treatment is not a concrete injury sufficient to support

13 standing. Valley Forge Christian Coll., 454 U.S. at 482. Nor could Mr. Baldwin argue that he 14 has standing because the ACA stigmatizes him as a man by creating women’s health offices 15

16 without creating men’s health offices. Rather, he must “identif[y] some concrete interest with

17 respect to which [he] is personally subject to discriminatory treatment.” Allen v. Wright, 468

18 U.S. 737, 757 n.22 (1984). Medical research is not such a concrete interest.21 See Spenceley v. 19 MD Anderson Cancer Ctr., 938 F. Supp. 398 (S.D. Tex. 1996). 20 Even if – again, contrary to fact – Mr. Baldwin could identify a concrete harm, he still 21

22 could not establish standing because he could not demonstrate that the harm is traceable to the

24 21 Mr. Baldwin asserts that from 1999-2006 there were 1.5 times as many deaths from 25 prostate cancer as from ovarian and cervical cancers, and he suggests that equal protection requires the ratio of research dollars devoted to these diseases be the same. (Pls.’ Br. 42-43.) In 26 fact, in 2009, the U.S. National Institutes of Health distributed 1.66 times the amount of money 27 for research on prostate cancer as for research on cervical and ovarian cancers. See National Institutes of Health Website, Research Portfolio Online Reporting Tools (accessed June 25, 28 2010) (http://www.report.nih.gov/rcdc/categories/). Thus, Mr. Baldwin’s harm appears not only to be speculative, but also to be nonexistent. 41

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1 ACA, or that it is likely to be redressed by a favorable decision. If the existence of the offices of 2 women’s health somehow injured Mr. Baldwin, that harm does not flow from the ACA, because 3 those offices existed before the statute was enacted. See Joint Stock Soc’y v. UDV North 4

5 America, Inc., 266 F.3d 164, 178 (3d Cir. 2001); Boating Indus. Assns. v. Marshall, 601 F.2d

6 1376, 1380 (9th Cir. 1979).

7 In addition, Mr. Baldwin’s claim is not appropriate for judicial resolution because it 8 asserts “‘generalized grievances more appropriately addressed in the representative branches,’ 9 which do not confer standing.” Newdow v. Rio Linda Union Sch. Dist., 597 F.3d 1007, 1016 (9th 10

11 Cir. 2010) (quoting Allen, 468 U.S. at 751). His claim, however it is characterized, is “shared in

12 substantially equal measure by all or a large class of citizens.” Thomas v. Mundell, 572 F.3d

13 756, 760 (9th Cir. 2009). Federal courts sit to decide particular cases and controversies, not 14 communal policy disputes. 15

16 In any event, Mr. Baldwin’s equal protection claim lacks any legal merit. Women’s

17 health offices further “a substantial interest of the State”: fostering advances in medical research

18 on women’s health issues. See Plyler v. Doe, 457 U.S. 217, 217-18 (1982); see also United 19 States v. Virginia, 518 U.S. 515, 533 (1996). They are part of a larger health care system 20 designed to further the medical needs of both men and women. And for many years, women 21

22 were regularly excluded from medical research studies. See, e.g., Vicki Lawrence MacDougall,

23 Medical Gender Bias and Managed Care, 27 Okla. City U. L. Rev. 781, 800-818 (2002).

24 Women’s health offices seek to overcome this history and achieve “health equity,” “a desirable 25 goal and standard that entails special efforts to improve the health of those who have experienced 26 social or economic disadvantage.” U.S. Dept. of Health and Human Services, Office of 27

28 Women’s Health Strategic Plan FY2010-FY2015, 38 n.3 (July 21, 2009) (available at

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1 http:www.womenshealth.gov/owh/about/). See also 155 Cong. Rec. E1819 (July 16, 2009) 2 (statement of Rep. Maloney) (nothing that the bill “will help close the serious gaps in health care 3 for women, by providing statutory authorization for the offices of women’s health in five federal 4

5 agencies”). By providing a statutory footing for these offices, which help to coordinate research

6 on long-ignored matters of women’s health, the ACA does not transgress the Fifth Amendment.

7 V. The Executive Order Is Not a Line Item Veto 8 Plaintiffs raise two claims with respect to the ACA’s appropriations to community health 9 centers. The first is that there are direct appropriations in the ACA that may be used by 10

11 community health centers, without limitation, for abortions. (Pls.’ Br. 46-47.) The second is that

12 Executive Order No. 13,535, 75 Fed. Reg. 15,599 (2010), which ensures the enforcement and

13 implementation of abortion restrictions with respect to the ACA, acts as an unconstitutional line- 14 item veto. (Pls.’ Br. 46.) Plaintiff lacks standing to raise these claims, which in any case fall 15

16 flat on the merits.

17 The ACA creates a Community Health Center Fund, to be administered by HHS, “for

18 expanded and sustained national investment in community health centers.” Pub. L. No. 111-148, 19 § 10503(a). It also appropriates increasing amounts for this fund for fiscal years 2011 through 20 2015. Id. § 10503(b)(1), as amended by Pub. L. No. 111-152, § 2303. The Executive Order 21

22 addresses the use of these funds. It explains that “[e]xisting law prohibits these [community

23 health] centers from using Federal funds to provide abortion services (except in cases of rape or

24 incest, or when the life of the woman would be endangered), as a result of both the Hyde 25 Amendment22 and longstanding regulations containing the Hyde language. Under the Act, the 26

27 22 The Hyde Amendment is a restriction in appropriations bills to prohibit the use of 28 federal funds for abortions except in circumstances involving rape, incest, or a danger to the life of the mother. See Doe v. United States, 419 F.3d 1058, 1062 (9th Cir. 2005). 43

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1 Hyde Language shall apply to the authorization and appropriations of funds for Community 2 Health Centers under section 10503 and all other relevant provisions.” Executive Order § 3; see 3 also 42 C.F.R. §§ 50.301, 50.302, 50.303, 50.304, 50.306. 4

5 Plaintiffs lack standing to challenge either the appropriations in the ACA or the

6 Executive Order. As to the appropriations, plaintiffs do not identify a concrete injury in fact.

7 They appear to contend simply that the appropriations injure them because they find abortion 8 morally objectionable. (Pls.’ Br. 47). Such moral objections do not create standing to sue. 9 Smelt v. County of Orange, 447 F.3d at 685. At all events, any “moral harm” allegedly caused 10

11 by these appropriations would constitute a generalized grievance not properly addressed to the

12 courts. Thomas, 572 F.3d at 760.

13 Plaintiffs can make no better claim to standing with respect to the Executive Order. 14 Again, they identify no concrete injury in fact, or a grievance not shared by all who feel as they 15

16 do. They do not allege that they would benefit from the appropriations that allegedly have been

23 17 vetoed or amended. To the contrary, plaintiffs’ motion states that they “are pro-life and object

18 to the [ACA’s purported] use of directly appropriated public funds for abortion.” (Pls.’ Br. 47). 19 If anything, the Executive Order advances that objective. Plaintiffs ignore this incongruity and 20 focus instead on their abstract objection to the Executive Order as an unconstitutional line-item 21

22 veto or statutory amendment. (Pls.’ Br. 46-47.) Abstractions, however, are not the stuff of

23 standing. See Valley Forge Christian Coll., 454 U.S. at 482; see also Carroll v. Nakatani, 342

24 F.3d 934, 940 (9th Cir. 2003) (abstract interest in law-abiding government is a generalized 25 grievance). 26

23 27 In addition, because these ostensible vetoes cover appropriations for future years, plaintiffs’ claims are speculative and unripe. Texas v. United States, 523 U.S. 296, 300 (1998) 28 (“A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all.”) (quotation marks omitted from parenthetical). 44

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1 Plaintiffs’ claims also fail on the merits. Community health centers may not use direct 2 appropriations for abortions without limitation. The Executive Order confirms that limiting 3 language contained in existing, duly promulgated regulations, which set conditions for the use of 4

5 money by these centers, applies to funds appropriated by the ACA. See Order § 3. The order

6 does not purport to negate any elements of the statute as a line item veto would, see Clinton v.

7 New York, 524 U.S. 417, 436 (1998), nor does it contradict any congressional mandates in the 8 ACA, which says nothing to undermine the existing regulations. Plaintiffs’ claims about the 9 Executive Order, in short, simply make no sense. 10

11 VI. Plaintiffs’ Claims Regarding Section 1552 Are Baseless

12 Plaintiffs maintain that Secretary Sebelius has failed to properly publish on the internet a

13 “list of all of the authorities” provided to her by the ACA, as required by the Act. (Pls.’ Br. 47, 14 citing Pub. L. No. 111-148, § 1552). They argue that the list that the Secretary produced 15

16 comprises “simplistic,” “incoherent and meaningless” statements, and neglects to apprise the

17 public of the “powers” granted her by the ACA. (Pls.’ Br. 48).

18 The Court need not address this argument because plaintiffs, again, stumble at the 19 threshold, failing to identify a concrete harm that is not widely shared in equal measure. See 20 Lujan, 504 U.S. at 564-65; Thomas, 572 F.3d at 760. And in any case, the Secretary has satisfied 21

22 the publication requirement. See Health Reform and the Department of Health and Human

23 Services, HHS Website (http://www.healthreform.gov/health_reform_and_hhs.html) (accessed

24 on June 25, 2010).24 The Secretary provides a synopsis of each title of the act, a list of the 25

26 24 Further, plaintiff do not challenge any final agency action, as required under the 27 Administrative Procedure Act, 5 U.S.C. § 704. An agency action cannot be final unless it determines rights or obligations, or results in legal consequences. Bennett v. Spear, 520 U.S. 28 154, 178 (1997). The Secretary’s alleged failure to properly list her powers under the ACA does not determine any rights or obligations, or result in any legal consequences. See Neighbors of 45

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1 sections with each title, and a short statement explaining her authority in language that all 2 Americans can understand. See id. These explanations adequately describe the scope of her 3 authority; their “[s]implicity is a virtue,” Nunez v. United States, 546 F.3d 450, 454 (7th Cir. 4

5 2008), given that the Secretary must communicate her message to all Americans, most of whom

6 do not have the time to become expert enough in ACA to understand a highly technical

7 explanation. Section 1552 requires nothing more than a list of authorities. The Secretary has 8 fully complied with that requirement.25 9 VII. Plaintiffs Are Not Entitled to a Preliminary Injunction 10

11 A. Plaintiffs Make No Showing That They Would Be Irreparably Harmed in the Absence of Emergency Relief 12

13 Plaintiffs’ failure to succeed on the merits of any of their claims necessarily means that

14 they cannot obtain a preliminary injunction. See American Trucking, 559 F.3d at 1052.

15 Moreover, to obtain such relief, they must also show that they are likely to be irreparably harmed 16 if the Court does not issue an injunction before rendering a decision on the merits. See American 17 Trucking, 559 F.3d at 1052. Plaintiffs fail to show that they will suffer any harm at any time – 18

19 let alone irreparable harm that will occur before the Court issues a decision on the merits.

20 Indeed, plaintiffs do not even try to demonstrate the existence of any harm, errantly relying on

21 now overruled case law which articulated a laxer standard. (Pls.’ Br. 48-49.) No matter; 22 plaintiffs could not demonstrate any such harm. As shown above, plaintiffs cannot demonstrate 23

24 Cuddy Mountain v. Alexander, 303 F.3d 1059, 1067 (9th Cir. 2002). 25 25 Even if plaintiffs could somehow prevail on this claim, they could not gain the relief 26 they seek (i.e., an order enjoining all federal defendants from acting to implement the act). (Pls.’ 27 Br. 48.) The APA permits courts to “hold unlawful and set aside agency action” if it is not “in accordance with law.” 5 U.S.C. § 706(2). Thus, plaintiffs could secure an order vacating the 28 existing list of authorities and remanding the matter to the agency, but that is all. See generally Alsea Valley Alliance v. Dep’t of Commerce, 358 F.3d 1181, 1185-86 (9th Cir. 2004). 46

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1 the injury necessary to establish standing, much less the irreparable harm required for a 2 preliminary injunction. See Caribbean Marine Servs. Co. v. Baldrige, 844 F.2d 668, 674 (9th 3 Cir. 1998) (explaining that the minimum injury necessary to demonstrate standing does not 4

5 suffice to establish irreparable harm); In re Navy Chaplaincy, 534 F.3d 756, 763 (D.C. Cir.

6 2008), cert. denied, 129 S. Ct. 1918 (2009) (noting that standing is a prerequisite for a

7 cognizable allegation of irreparable harm). And in light of the purely legal nature of this case, a 8 final decision should come relatively quickly, and in any case long before the provisions at the 9 heart of plaintiffs’ complaint – involving the need to secure minimum insurance coverage – take 10

11 effect in 2014.

12 B. The Balance of the Equities and the Public Interest Weigh Strongly 13 Against Granting Preliminary Relief

14 Plaintiffs cannot establish that either the balance of equities or the public interest weighs

15 in their favor. The Supreme Court has cautioned that “courts of equity should pay particular 16 regard for the public consequences in employing the extraordinary remedy of injunction.” 17 Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982). “The public interest may be declared 18

19 in the form of a statute.” Golden Gate Rest. Ass’n v. City & County of San Francisco, 512 F.3d

20 1112, 1127 (9th Cir. 2008) (internal quotation omitted). Where the elected branches have

21 enacted a statute based on their understanding of what the public interest requires, this Court’s 22 “consideration of the public interest is constrained . . . for the responsible public officials . . . 23 have already considered that interest.” Id. at 1126-27. Indeed, “a court sitting in equity cannot 24

25 ignore the judgment of Congress, deliberately expressed in legislation.” United States v.

26 Oakland Cannabis Buyers’ Coop., 532 U.S. 483, 497 (2001) (internal quotation omitted).

27 When it enacted the ACA, Congress determined that the Act would reduce the costs 28 attributable to the poorer health and shorter life spans of the uninsured, lower health insurance 47

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1 premiums, improve financial security for families, and decrease the administrative costs of health 2 care. Pub. L. No. 111-148, §§ 1501(a), 10106(a). Congress also determined that the minimum 3 coverage provision is “essential” to achieving these results. Id. As millions of Americans 4

5 struggle without health insurance, as medical expenses force them into personal bankruptcy, as

6 the spiraling cost of health care encumbers the entire economy, it is not for plaintiffs to second-

7 guess these legislative judgments as to what the public interest requires. 8 Conclusion 9

10 The government’s motion to dismiss should be granted, and plaintiffs’ motion for a 11 preliminary injunction should be denied. 12

13 Dated: June 25, 2010 Respectfully submitted,

14 TONY WEST Assistant Attorney General 15

16 IAN HEATH GERSHENGORN Deputy Assistant Attorney General 17 LAURA E. DUFFY 18 United States Attorney 19 /s/ Joel McElvain 20 JENNIFER R. RIVERA Director 21 SHEILA LIEBER 22 Deputy Director ETHAN DAVIS 23 JOEL McELVAIN JUSTIN M. SANDBERG 24 Attorneys for Defendants 25

10cv1033 Case 3:10-cv-01033-DMS -WMC Document 24 Filed 06/25/10 Page 63 of 63

1 Certificate of Service 2 I hereby certify that on June 25, 2010, I electronically filed the foregoing paper with the 3 Clerk of the Court using the ECF system which will send notification of such filing to the 4

5 following:

6 Peter Dominick Lepiscopo 7 Lepiscopo & Morrow, LLP 2635 Camino del Rio South, Suite 109 8 San Diego, CA 92108 9

10 /s/ Joel McElvain JOEL McELVAIN 11

10cv1033